Talks between Nordic Aviation Capital (NAC) and its creditors over a debt standstill agreement have stalled over demands by unsecured lenders to take assets as security, Airfinance Journal understands.
The lessor is seeking agreement from its lenders to defer debt interest and principal repayments on more than €5 billion ($5.6 billion) of debt, while it weathers the impact of the Covid-19 crisis.
It secured a scheme of arrangement from the High Court in Dublin earlier this month, but needs the agreement of lenders voting in classes representing 75% by value and more than 50% by number to approve the plan.
A vote on the agreement scheduled for 24 June was postponed and NAC has proposed the vote be rescheduled to 9 July, to give it more time for negotiations with its lenders.
A banking source says that unsecured lenders all voted against the proposal. “They are earning unsecured margins and want assets,” the source says.
Another source, who is a secured creditor of the lessor, says that unsecured lenders are not “entirely happy with what is on the table”.
“I would think they are looking - with the unencumbered assets - to become a secured lender as well,” the source notes.
“The fundamental problem with NAC here is that they have over 100 creditors and they can only sort of talk to the biggest ones, otherwise it would become not manageable for them, which is a point with which I have some sympathy,” he adds.
The source says that although “what is on the table right now is not great”, the alternative to accepting the debt standstill would be a “Chapter 11 type of procedure”, adding: “I think that’s even worse”.
“I am still quite hopeful they will get there, but the first attempt failed,” the source adds.
Another bank source, who holds both secured and unsecured debt with NAC, says: “There is a process going on right now, clearly there are two sets of creditors – secured and unsecured – so there is a bit of an impasse between them as to what is possible”.
The source says he does not know how the negotiations will play out, adding that the bank has contingency planning to go through.
“Obviously they have to figure what is best for them and what is doable for the survivability of the company,” he adds.
NAC declined to comment when contacted by Airfinance Journal.
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