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.
The recent decision of the High Court in Fistonich & Anor v Gibson & Ors [2022] NZHC 1422 considered whether receivers have a right to retain surplus funds to meet the cost of defending actual or forecast claims against the receivers.
Background
The case involves the sale of the business and land associated with Villa Maria winery, which was owned and operated through Villa Maria Estate Ltd and established 60 years ago by Sir George Fistonich. FFWL Ltd was the holding company of Villa Maria Estate Ltd.
Key Point
- The UK government's proposals to only partially implement a new UNCITRAL Model Law means that creditors of English law debts who do not consent to a foreign restructuring proceeding will still have recourse to enforcing their rights against the debtor's UK-based assets.
English Law Is Still a Special Situation
Elon Musk recently said he has a "super bad feeling" about the economy, pithily declaring what most financial commentators have been predicting in more technical terms.
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
The importance of subcontractors scrutinising how retention funds are held, and how they are dealt with by insolvency practitioners, was highlighted in the recent High Court decision in McVeigh v Decmil Australia Pty Limited & Anor [2021] NZHC 2929 (Decmil). The liquidator sought an order from the Court to be appointed as receiver of the retentions fund.
Liquidators have wide-ranging powers under the Companies Act 1993 (Companies Act), including the power to request directors, shareholders or any other relevant person to assist in the liquidation of a company.
In Meltzer and Lamacraft v Amstar New Zealand Ltd the High Court highlighted the interplay between insolvency and construction adjudication issues.
The High Court in Meltzer and Lamacraft v Amstar New Zealand Ltd [2020] NZHC 3510 has confirmed that a payee cannot enforce an adjudication determination and may not be able to maintain charging orders if the payer goes into administration.
KEY POINTS The risk that prepetition lease payments made by a lessee that is a debtor in a US bankruptcy will be clawed back from an aircraft lessor can be reduced if: • the lease is a true lease rather than a disguised secured loan or finance lease • one or both of basic rent and maintenance reserves are payable in advance (i.e., at the beginning of a rent period rather than at the end) • basic rent and maintenance reserves are payable monthly rather than quarterly or semiannually • the lessor enforces the lease’s payment obligations consistently • any payment made by a third party on beha