Key Points
Hong Kong Airlines (HKA) has announced that it is seeking to implement a restructuring of its aircraft lease obligations and other liabilities by court action in the UK and Hong Kong.
The plan proposes to give aircraft lessors a right to an upfront cash recovery — of about 5 percent of their claims (or in the case of lessors of aircraft being retained, the right to elect equity in the restructured HKA) — and potential future payouts starting in 2028 tied to the future earnings of the airline.
Key Points
- The use by Malaysia Airlines' subsidiary, MAB Leasing Ltd. (incorporated in Malaysia) ("MABL"), in 2021, of an English Scheme of Arrangement (a "Scheme") to compromise its aircraft lease obligations proved that US Chapter 11 is not the only route to a globally recognised compromise of airline leases.
- Airline lessors should now prepare themselves for Schemes (and possibly also other English restructuring processes) as an alternative to Chapter 11.
Background
Introduction
Solvency test
Standing and process
Purposes of administration
Effects of administration order
Administrator's duties and functions
Remuneration and swearing in of administrator
Introduction
The Companies (Guernsey) Law, 2008 (“Companies Law”) provides for companies, protected cell companies (“PCCs”), incorporated cell companies (“ICCs”) and cells of PCCs and ICCs to be placed into administration and for an administrator to be appointed to manage that entity's affairs whilst the administration order remains in force.
In September 2012, Grant Thornton were appointed by the Royal Court of Guernsey as joint administrators of a Guernsey company called Montenegro investments limited (MIL) - a Guernsey property Investment Fund.. The joint administrators then appointed Ogier.
Current Status of MIL