If the Norwegian gets the green light after the court hearing on December 7, the airline has a good chance of survival, experts say. However, the bankruptcy lawyer believes that the current shares are worth zero.
When the Norwegian filed for bankruptcy in an Irish court, the clock started ticking. Within 150 days, the airline must find the rescue.
But to get protection during this period, the company must first get the green light from the court, a decision made after a hearing held in Dublin on Monday, December 7th.
Judge Michael Quinn’s plan to take office was announced on Thursday. It includes the complete or partial cancellation of all debt, in exchange for shares and the collection of billions of new capital.
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Consider the Norwegian getting the green light
Amanuensis Alexandros L. Seretakis of Trinity College Dublin, which has Irish company law as one of its areas of expertise, believes the airline has a good chance of doing so.
– I think the court will accept that, because the Norwegian has a reasonable chance of survival. Eventually, they will probably write off the debt and find new capital from an investor. They are likely to continue as a smaller company, Seretakis told E24.
– As long as they manage to present a viable plan for a Norwegian, which I think they will do, to reduce debts and find new capital. They will probably say that the coffin is destructive for the company, so that the Norwegian will be able to continue working in a world without coffins, he added.
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On the edge of the cliff
The Norwegian conducted a comprehensive rescue operation this spring, but was aware that the company needed more capital to recover from the crisis.
Travel restrictions due to the pandemic reduced the number of passengers by 91 percent and caused the Norwegian a deficit of NOK 6.4 billion in the second and third quarters.
However, the airline was rejected this autumn after requesting $ 1 billion in direct aid from the state, and on November 18 the company filed a request to protect Irish subsidiaries under a scheme called “review”.
This means that creditors can not enforce their claims or file for bankruptcy of the company as long as it has the protection of the court.
The Norwegian can continue working through the process, which is one of the advantages, says Seretakis.
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He has to convince the court
According to lawyer Gavin Simmons, most companies that are fully involved in the “examination” process succeed in restructuring the company.
He works as a partner in the Dublin-based law firm AMOSS, restructuring the company.
The firm is also an Irish member of the international law firm Interlav, of which the Norwegian law firm Haavind is a member.
“It’s not about ‘putting them to the test and waiting to see if they have a good chance of survival.’ From the outset, the court must be convinced that there is a reasonable prospect of success in order to confirm the appointment of an “examiner”, Simmons said.
The person appointed as the so-called examiner (examiner) by the court has a central role in the work of putting together a rescue plan. KPMG auditor Kiran Wallace has been given a Norwegian assignment.
– To a large extent, only qualified companies come out of the starting port. And, if they come out of the starting point and can secure the necessary investment, they have a very good chance of finally passing the examination process, the lawyer said.
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Today’s shareholders are the least concerned about the court, according to Simmons.
After the Norwegian filed for bankruptcy, the share fell by 20 percent, but the market capitalization is still NOK 1.4 billion. Nordic small savers also continue to shop at the company.
– They have a profit advantage in the company, and thus must withstand the consequences of the loss. “When they go to court and say the company is insolvent, the value of that participation is zero,” the lawyer said.
A group of creditors can bind everyone
During the period under the protection of the court, the auditor must find a solution, which will include debt write-off and that the new capital is injected in Norwegian.
“He has to secure the new investment, formulate his debt settlement proposal, convene meetings in different classes of creditors, submit proposals for a vote,” Simmons said.
Then it will be enough for the creditor class to accept the decision. It will also oblige other creditors.
“It is necessary for the scheme to be approved by the court with a minimum level of support and to be binding on all creditors, regardless of whether they voted for or against the treatment they receive under the debt scheme,” the lawyer said.
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Losses to creditors
In the process, creditors are divided into groups. They will be covered only part of their uncollected claim, the so-called “Dividend”.
“Instead of paying them 100 percent, you may be able to pay unsecured creditors 5 percent of the debt, while priority creditors, such as the tax authorities, can get 15-20 percent,” Simmons said.
However, it can not be worse for creditors than in a situation of bankruptcy, where the company is divided and sold little by little, the so-called liquidation. In a recent court report, creditors predicted a loss of C $ 64 billion in the event of bankruptcy.
– The dividend paid to them must be at least equal to the one that creditors would receive in case of liquidation of the company. He takes care of the historical obligations, says the lawyer.
He points out that the company may also have to clear up future liabilities, such as renting aircraft.
“The testing process will deal with historical obligations, but it must lay a solid foundation for the company in the future so that it will be profitable in the future,” Simmons said.