According to the marketing blurb, Gardens International, a high-end office development in the heart of Limerick city, is billed as a combination of “dynamic contemporary architecture and old heritage buildings”. The building stretches to 80,000 square feet, with its promoters proudly declaring that it will be “associated with innovation, ambition and imagination”.

And, as it announced that it was taking the three floors of the building in 2019, Nordic Aviation Capital (NAC), the Irish-headquartered aircraft leasing giant, certainly did not want for ambition or imagination. The announcement was part of a wider plan to expand its footprint in Limerick, and it was part of a strategic expansion where the company also placed an order worth $4 billion for more than 125 aircraft.

At the time of the June 2019 announcement, Nordic had a portfolio worth $6.8 billion, with 426 aircraft and 71 clients in 48 countries. “These recent developments are key components of our ambitious, long-term business growth strategy,” said Jim Murphy, the chief commercial officer of NAC.

That was then. This is now. Like many aviation businesses, Nordic was bruised and battered by the pandemic and was forced last year to agree to a payment freeze with creditors in a scheme of arrangement sanctioned by the Irish High Court. The deal was supposed to safeguard the business into the future and saw shareholders inject $60 million (€53.5m) of new equity into the company.

Now, the company is once again preparing to pull the trigger on yet another restructuring. The Currency has learned that the leasing company recently completed a low-profile tender looking for an accountancy firm to manage an examinership process in Ireland.

The tender has been won by PWC, who are now waiting in the wings to act as a court-appointed examiner. KPMG has been advising on the process, as are the UK law firm Clifford Chance. KPMG, its auditors in Ireland, are expected to author the Independent Expert Report, a crucial document that would recommend to the court of the company could be salvaged through an examinership process.  

Another option being advanced by the company is to avail of a Chapter 11 bankruptcy process in the US. Both routes are under active consideration, and a decision is expected to make in the coming weeks. Although headquartered in Ireland, the lessor had a large number of subsidiaries in the US, and a number of its advisors are arguing that Chapter 11 would offer a more streamlined process than navigating the Irish legal system.

Advisors had excepted a decision earlier this summer, but a final determination has been delayed with creditors agreeing to extend repayment deadlines. However, it is now clear that a restructuring will take place. All that remains in question is whether the Irish registered company will run the process through Ireland or the US.

So just what went wrong so quickly after the 2020 restructuring and where does Ireland fit into the process?

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Ireland has long been a hub for global aviation – home to most of the world’s aviation leasing companies. Most operate out of Dublin. Nordic, the fifth-largest aircraft leasing company in the world, chose Limerick where it employs 100 people.

Founded in Denmark in 1990, Nordic Aviation leases almost 500 aircraft to about 75 airline customers and has about $5.9 billion of debt backed by different assets held in subsidiaries. It specialises in regional aircraft, i.e smaller aircraft, mainly up to 100 seats, used for short journeys.

That restructuring is now coming. And it may well be focused here in Ireland.

And, for a sustained period, the model worked. In its 2019 expansion announcement, it unwrapped plans to buy 20 new A220 aircraft from Airbus, its first investment in this type of aircraft, and more than 100 aircraft from ATR, adding to the more than 200 it already owned. Customers included Stobart Air, British Airways and Lufthansa.

The airline entered into the Covid-19 crisis in a strong liquidity position, having just posted its strongest first-half performance to date – as of its results to the end of June 2019, it had shareholders’ equity of $1.8 billion.

The pandemic, however, was a gamechanger. With planes grounded, the company was struggling to secure payment from a number of cash strapped airlines. Stobart, for example, collapsed. With debt deadlines drawing near, it prepared a scheme of arrangement to help it navigate the crisis.

As part of the deal, long-term equity shareholders EQT Partners, KIRKBI Invest, GIC (the sovereign wealth fund of Singapore) and Martin Moller, NAC’s founder and chairman, agreed to inject $60 million into the company. It also agreed to a debt standstill and deferral scheme with lenders to counteract the negative impact Covid-19 had on the business.

The scheme enabled Nordic to defer its principal payments for nine months and interest payments on aircraft financing for five months. Interest payments on other term loans could be deferred for about 17 months. It also extended the maturity of each of the loans for an additional 12 months from the original scheduled maturity date.

The agreement has since been extended out on a month-by-month basis. However, lenders are now looking to cut their exposure. Bloomberg reported in June that an unnamed lender to a unit of Nordic Aviation Capital AS was seeking to sell a $50-million portion of a credit facility at roughly a 30 per cent discount to face value.

Major Nordic Aviation’s shareholders — Singapore’s sovereign fund GIC and private equity firm EQT Partners — have said they won’t contribute further to support the business after injecting $60 million of fresh funds in 2020.

The company’s founder and shareholder, Martin Moller Nielsen, told Danish newspaper Borsen in March that the lessor would need a “miracle” to avoid a restructuring.

That restructuring is now coming. And it may well be focused here in Ireland.

The Currency’s aviation coverage

The Currency has led the way in its reporting on the impact of the pandemic on the aviation sector in Ireland, breaking a string of international stories and backing it up with detailed analysis and thoughtful opinion.

In October 2020, we revealed that Norwegian Air was weighing up an examinership of its Irish operation, a move confirmed just weeks later. We continued to lead the way on coverage of the story, detailing the inside story of how it had been salvaged.

Just months before, we reported how Dublin-based Stobart Air was working with its advisers to try and cut a deal with its unwieldy shareholder roster and lenders, while CityJet, was in heightened talks with creditors. We were the first to report when the latter went into examinership, and, more recently spoke to its founder Pat Byrne about the impact of the process and the future for aviation in Ireland.