Weil has successfully represented Norwegian Air Shuttle ASA (“NAS”) and its primary operating entity in obtaining chapter 15 recognition of the highly complex and innovative restructuring plan embodied in Schemes of Arrangement and a Reconstruction Plan confirmed in Ireland and Norway.
Outline of the restructuring
On May 26, 2021, NAS announced the effectiveness of a comprehensive restructuring plan and the conclusion of parallel restructuring proceedings in Ireland and Norway.
The company utilized an Irish Examinership proceeding and a Norwegian Reconstruction proceeding to:
- Streamline and reorganize the business around a strengthened, short-haul network in Europe;
- Raise NOK 6 billion (~ USD 725 million) of new investment through a combination of a public offering and a private placement to certain investors and existing creditors; and
- Reduce the company’s overall debt from approximately NOK 53.7 billion (~ USD 5.9 billion) as of the commencement of the foreign proceedings to approximately NOK 16-18 billion (~ USD 1.9-2.2 billion).
NAS’s reorganization is the first-ever use of the 2020 Norwegian Reconstruction Act to restructure debt of a publicly traded Norwegian company, and the first-ever recognition of a Norwegian reconstruction proceeding under U.S. bankruptcy law. This also appears to be the only instance where an Irish Examinership has been recognized under U.S. chapter 15, although voluntary schemes of arrangement in Ireland have been given full force and effect in the U.S. under chapter 15 on several prior occasions. Through Weil’s guidance, the company was able to access and take advantage of the valuable tools available in chapter 15 to implement its cross-border restructuring and emerge as a “trimmed down” Nordic-focused airline relieved of massive debt and other obligations, with significant fresh capital.
Chapter 15: The basics
Chapter 15 of the U.S. Bankruptcy Code is an effective restructuring tool that facilitates cooperation between U.S. and foreign bankruptcy courts for companies with global assets and operations. It enables a company that has commenced one or more insolvency proceedings outside the U.S. to obtain recognition and enforcement of such foreign proceeding(s) and certain other relief from a U.S. bankruptcy court with respect to the debtor’s assets and creditors in the U.S. Most often, that relief includes enjoining creditors from taking enforcement actions against the company’s U.S.-based assets during the pendency of the foreign proceedings and, once a plan is confirmed, in contravention of the restructuring plan.
Timing is everything
The Irish Examinership served as the lead proceeding for NAS and its affiliates, through which the company shed a number of burdensome agreements, including operational contracts and leases that no longer fit within the streamlined business model and guarantees provided in respect of lease obligations.
The restructuring also proceeded in Norway through a parallel process for NAS under Norway’s Reconstruction Act that tracked the Irish Examinership. The Reconstructor appointed for NAS proposed a Reconstruction Plan that implemented under Norwegian law the terms of the Examiner’s Scheme for NAS, such that the relief granted in the Reconstruction Proceeding mirrored the relief in the Examinership. NAS needed the additional proceeding in Norway because local law would not recognize the Examinership process in Ireland.
In light of the cross-border nature of the Norwegian group’s business and the existence of significant operations, assets, and liabilities in the U.S., the company sought recognition of the Irish and Norwegian proceedings under chapter 15 of the U.S. Bankruptcy Code. The chapter 15 cases were commenced shortly after the launch of the Schemes and the Reconstruction Plan. Staged this way, the chapter 15 notice period ran concurrently with the creditor meetings, voting periods, and confirmation hearings in the foreign jurisdictions, so that the recognition hearing could be held shortly after the Schemes and Reconstruction Plan were approved in the foreign courts.
The sequential staging of the three proceedings provided certainty and avoided conflicting rulings from different courts. The Irish Examinership served as the lead process, confirmation of the Reconstruction Plan was facilitated by the Irish Court authorizing the Examiner to vote in the Reconstruction Proceeding on behalf of creditors, and the company was able to present the U.S. Court with a complete set of proceedings and approved orders for recognition after such matters had been subject to notice and a hearing in the respective jurisdictions. All of this required seamless and careful coordination among the various company advisors in Ireland, Norway, and the U.S. to ensure all elements of the restructuring strategy would work in each jurisdiction.
What’s next for chapter 15
The uncontested recognition order expanded application of chapter 15 to unchartered territory by recognizing the Irish Examinership and Norwegian Reconstruction Proceeding as foreign main and non-main proceedings, and recognizing and giving comity to the Schemes, the Reconstruction Plan, and orders entered by the Norwegian court and the Irish court, including the orders repudiating contracts, releasing related company liabilities, and permitting distributions to old equity. Entry of the chapter 15 recognition order was integral to an effective restructuring, to protect assets in the U.S. and to bind U.S. creditors to the approved Schemes and the Reconstruction Plan. In addition, recognition gave comfort to new investors participating in the capital raise transactions that the foreign restructuring plans would be protected from creditor actions that could threaten the success of the reorganization.
These cases are a clear example of how a chapter 15 court’s grant of comity to foreign restructuring plans and orders furthers the policies of chapter 15: to foster cooperation between U.S. and foreign courts, to ease administration of complex reorganizations, to facilitate the rescue of troubled businesses, and to promote efficient and fair cross-border proceedings. In this instance, the restructuring plan was highly innovative and the novel questions of law required the assistance and cooperation of courts in Ireland, Norway, and the U.S. The end result is that, with vaccination rates rising and travel restrictions easing, a restructured, streamlined NAS is poised to capitalize on increased passenger bookings and continue to strengthen its balance sheet.
Chapter 15 continues to demonstrate its fundamental strength and utility in providing global enterprises with the opportunity to have foreign insolvency processes recognized and enforced in the U.S. A number of jurisdictions, like Norway, have recently enacted new or reformed insolvency laws. The NAS case is indicative that these legal initiatives will provide more alternatives for global enterprises to restructure their businesses through proceedings in foreign jurisdictions coordinated with parallel U.S. chapter 11 or chapter 15 cases. This optionality for synchronized proceedings in multiple forums is particularly relevant in the aviation industry, where businesses often are incorporated or headquartered in Ireland with assets and operations in different countries around the world. Regardless of industry, Weil’s experienced practitioners can help guide businesses or creditors through these important analyses and decisions, to develop an optimal cross-border strategy.
More from the Weil European Restructuring Blog
This website is maintained by Weil, Gotshal & Manges LLP in New York, NY © 2020 Weil, Gotshal & Manges LLP, All Rights Reserved. The contents of this website may contain attorney advertising under the laws of various states. Quotation with attribution is permitted. This publication is provided for general information purposes only and is not intended to cover every aspect of the purpose for the law. The information in this publication does not constitute the legal or other professional advice of Weil London or the authors. The views expressed in this publication reflect those of the authors and are not necessarily the views of Weil London or of its clients. These materials may contain attorney advertising. Prior results do not guarantee a similar outcome.