The scheme of arrangement for airline Aer Arann, and the process of getting it approved are the new standard, the airline’s examiner, Michael McAteer tells Padraic Ryan, InsolvencyJournal.ie reported.
To hear Michael McAteer describe the scheme of arrangement for Galway-based airline Aer Arann, which exited examinership on Wednesday, it sounds, at first, quite straightforward.
“The super-preferential creditors are now getting 100p in the pound, albeit over a phased period, the preferential creditors are 12.5p in the pound, and the unsecured creditors are getting 10p in the pound,” he says. “So the scheme is quite simplistic, within the scheme. It’s when you get outside the scheme it gets more complex.”
It is that part outside the scheme – several agreements reached with various creditors, whereby they will receive the entirety of debts owed to them – that complicated matters, and resulted in several exhausting, nail-biting hearings in the High Court this and last month, as Ms Justice Mary Finlay Geoghegan weighed up whether to approve the proposed survival plan.
The Judge agreed to a revised scheme of arrangement last Friday. Grant Thornton’s McAteer, who was examiner to Aer Arann, explains that the airline’s nature meant that any scheme of arrangement would involve unusual agreements with certain types of creditors.
“If [for example] you have a logistics company that has trucks on the road, its business is not dependant on ownership of the roads. Or if you can’t get petrol from Tesco you just go down the road and buy it from Esso.
“In [Aer Arann, however], what you had was a number of absolutely key, essential creditors.
“If you could not land your planes at Dublin airport [Dublin Airport Authority were one of the creditors with whom agreement was reached], 75 per cent of your business was gone; if [Aer Lingus, which was a franchise partner of Aer Arann] didn’t get paid, they would terminate the agreement, if they terminate the agreement, you don’t have Aer Lingus, you don’t have Aer Lingus, you don’t have 60 per cent of your business; ATR was the aircraft manufacturer, all [Aer Arann’s] aircraft were ATR, its staff, its engineering department, its logistics department. ATR only do the maintenance on their own aircraft, they won’t allow anybody else touch them.
“[So] we were forced down a line where certain creditors needed to be dealt with outside of the scheme, because less than 100p payment in the pound would have resulted in aircraft being repossessed, or planes not being allowed to land, and that would have gone to the core of the ability of the company to trade into the future.” Read more.
