Nordic Aviation Capital Structure, Organizational Chart Available on Reorg

Relevant Items:
Bickle Declaration
Organization Chart

Nordic Aviation Capital, the “world's largest regional aircraft lessor,” and several affiliates filed petitions for chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Virginia on Friday, Dec. 17.

Based on disclosures provided in Nordic Aviation’s first day filings, a summary of the company’s capital structure and organizational chart is provided below, with additional details regarding collateral support where such information is publicly available.The company’s capital structure consists of $6.332 billion in debt across 39 facilities and notes issuances provided by 83 lenders. Certain tranches of the company’s debt are backed by its aircraft fleet. As of Dec. 16, NAC’s fleet consisted of 475 regional aircraft, 469 of which are owned and six of which are managed.

A summary organization chart for the company is shown below:

A complete organizational chart for the company is available HERE.

The company refers to the group of entities as a whole as the “NAC group,” which comprises 119 entities, including 60 aircraft owning entities, or AOEs, 12 service entities, 15 “lease-in-lease-out” intermediate leasing entities, or LILOs, and one joint venture. There are 117 debtor entities, with the two excluded entities consisting of a JV, KN Operating Ltd., and an entity in liquidation, Nordic Aviation Services SA (Pty) Ltd.

The AOEs house the debtors’ aircraft while the service entities employ the employees and perform operational, transactional and administrative functions for NAC. The LILOs serve as intermediaries between AOEs and third-party lessees, leasing aircraft from the AOEs and then subleasing those aircraft to customers.

The company’s capital structure is shown below:


In their first day declaration, the debtors group their prepetition debt into a set of silos that align with the entities shown in the summary organization chart above. These silos are:

• Nordic Aviation Capital Designated Activity Co., or NAC DAC, which is NAC’s ultimate parent entity and guarantees all direct secured facilities, finance leases and Japanese operating leases with call options, or JOLCO, leases. NAC DAC is also the issuer under the debtors’ unsecured financing facility with the largest commercial pension fund in Denmark, PFA Pension. As of Dec. 6, $522.9 million was outstanding under the PFA facility.


• NAC 29 and subsidiaries, incorporated in either Ireland, Malta, Cyprus or the United Kingdom, which include a group of AOEs that owns 234 aircraft financed by approximately $3.6 billion of debt. Lenders have security interests in NAC 29’s aircraft and $300 million in restricted cash. NAC 29 debt comprises four separate issuances of U.S. private placement notes, a revolving credit facility, four Schuldschein loans, one term loan facility arranged by the Korea Development Bank, and two term loan facilities arranged by the Development Bank of Japan.
  
  As part of a July 2020 scheme of arrangement, NAC 29’s then-unsecured lenders were provided with a security package including security interests in NAC 29’s aircraft and $315 million in restricted cash (of which approximately $300 million remains, as noted above). Additional details regarding the NAC 29 debt is available here.


• NAC 33 and NAC 34, which are AOEs incorporated in Ireland and which collectively have nine direct or indirect subsidiaries that own 37 aircraft financed by approximately $541.9 million in outstanding obligations. These subsidiaries are incorporated in the British Virgin Islands, Ireland, Sweden or the United States, and are borrowers under senior secured term loan facilities arranged by BNP Paribas.


• NAC AS, which is a service entity incorporated in Denmark and the parent entity of 60 debtor entities that collectively own 194 aircraft financed by approximately $1.6 billion in outstanding obligations as of Dec. 6. NAC AS and its direct debtor subsidiaries own or lease 143 aircraft financed by approximately $1.1 billion in outstanding obligations including direct secured facilities, finance lease facilities and ECA financing arrangements.
  
  Separately, NAC Pte. Ltd., a private limited company incorporated in Singapore and direct subsidiary of NAC AS, and its 23 subsidiaries collectively own or lease 50 aircraft financed by approximately $422 million in outstanding obligations. Several of the facilities for which NAC AS’ direct subsidiaries are borrowers are cross-collateralized with facilities under which NAC Pte. Ltd.’s subsidiaries are borrowers.
  
  An organizational chart reflecting only the NAC AS and NAC Pte. Ltd. entities and their subsidiaries is available HERE. This organizational chart appears to reflect an association between certain debt facilities and various subsets of the NAC AS and NAC Pte. Ltd. subsidiaries.
  
  For instance, it specifies that NAC Aviation 3 AS is associated with the $12.9 million SMBC facility. In line with the above disclosure regarding cross-collateralization, the chart also reflects certain instances where direct subsidiaries of both NAC AS and NAC Pte. Ltd. are associated with a given debt facility, for instance, in the case of the ECA and EDC facilities. The company indicates that NAC Pte. Ltd. and its subsidiaries are borrowers under the KfW facilities, the ECA financing arrangements and certain JOLCO facilities but does not provide additional detail in its first day pleadings, based on a limited review by Reorg.
  
  Therefore, the above capital structure does not attempt to differentiate the collateral backing the various NAC AS and NAC Pte. Ltd. associated debt facilities, but rather lists each facility as associated with those entities and the overall collateral pool, which contains 193 aircraft.

A summary of the ownership of aircraft by debt silo is shown below:

A summary of NAC’s fleet, including the six managed aircraft, is shown below for reference:

As of the petition date, the debtors hold approximately $314 million in restricted cash and $159 million in unrestricted cash, $136 million of which is held by NAC DAC. According to the first day declaration of Briana Richards of Ernst & Young, the debtors’ restructuring and tax advisor, the debtors have yet to reach an agreement with their prepetition secured lenders on the consensual use of cash collateral but have obtained a $170 million DIP financing commitment from existing creditors. The company said in its first day filings that it intends to finalize the terms of DIP financing and the use of cash collateral in the “coming days.”

Nordic Aviation filed its chapter 11 cases with the support of creditors holding “over 73%” in amount of its $6.3 billion aggregate debt obligations. The company has entered into a restructuring support agreement and would seek to reduce debt by over $4 billion and raise $537 million of new capital to fund the “newly devised and creditor-approved business plan.” The RSA also provides a “consensual path forward for certain creditors who want to leave the NAC Group.”

In advance of Tuesday’s first day hearing, an ad hoc committee of secured lenders to NAC Aviation 33 Ltd. and NAC Aviation 34 Ltd. filed a statement and reservation of rights. Nelly Almeida of Milbank, co-counsel to the NAC 33/34 lender committee, said at the hearing that her clients are continuing to engage with the debtors to reach a consensual separation of NAC 33/34 from ultimate parent company NAC DAC, together with a recapitalization for NAC 33/34.

Almeida said that although the parties have “narrowed down the issues,” they have yet to reach an agreement. If negotiations break down, the NAC 33/34 lender group may be forced to commence litigation, Almeida indicated. An ad hoc group of secured lenders with holdings across the capital structure, represented by Weil Gotshal, Norton Rose and McGuireWoods collectively, also filed a Rule 2019 statement on Tuesday.

-- Nick Williams