Vol 20 (2023) - Issue 5

Article preview

Hong Kong Airlines Restructuring: Parallel English Plan and Hong Kong Scheme

Synopsis
Battered by the COVID-19 pandemic and the decline in passengers travelling to Hong Kong, Hong Kong Airlines ('HKA') has become the latest carrier to undergo a debt restructuring. Its restructuring plan was sanctioned by the English court on 9 December 2022 and its scheme of arrangement was sanctioned by the Hong Kong court on 14 December 2022.
In summary:
– The English High Court proceeded on the basis that the Cape Town Convention applied, and did not address the much debated question of whether a restructuring plan constituted an 'insolvency related event' for the purposes of the Convention.
– The unsecured class in the Restructuring Plan included secured creditors in respect of that part of their debt which exceeded the value of their security, the English High Court being satisfied that the plan did not affect their security rights. This approach was followed by the Hong Kong Court in its consideration of the scheme.
– The English High Court confirmed that the 'sufficient connection' requirement was satisfied. The Court noted that whilst, in other cases, a 'sufficient connection' existed as an 'overwhelming majority' of the plan/scheme company's indebtedness was governed by English law, this was not a requirement. 'Sufficiency' fell to be established by the facts of each case and not by satisfaction of a numerosity requirement.
– The Hong Kong Scheme's effectiveness was conditional but the Hong Kong Court considered that the conditions didn't represent any impediment as: they were either within HKA's control; or, as regards Government authorisations, HKA did not expect insuperable difficulties in obtaining them; and all relevant parties were committed to the successful implementation of the scheme.