Following what it determined to be an inconclusive judgement in Malaysia Airlines' restructuring, The Aviation Working Group (AWG) continues to seek a ruling that certain UK Companies Act 2006 Part 26 schemes constitute Cape Town Convention insolvency proceedings.
AWG noted that this week’s Malaysia Airlines judgment did little to support its cause.
“As all MAB scheme creditors agreed to it, the High Court of Justice for England and Wales decision of 23 February 2021 did not address the issue of whether a part 26 scheme in the insolvency context is a Cape Town Convention ‘insolvency proceeding’ (thus preventing cram-down). The court action is consistent with the request made in AWG's letter to the court dated 21 February 2021,” AWG said.
It added: “The judge noted that he is ‘content to leave resolution of the issue of whether a scheme under Part 26 A 2006 falls within the definition of an ‘insolvency-related event’ under the Aircraft Protocol or the 2015 Regulations to a case in which it matters.’
The judge further stated that: ‘… the Scheme purported to bind the non-assenting creditor, and I believe that the court should be concerned whether it was right to give its sanction to a scheme which might be thought to breach an international convention to which the UK is a party.’"
AWG said that the item “may be addressed in a future case, and, for use in such case, AWG is securing a powerful opinion to the effect that such Part 26 schemes are in fact Cape Town Convention insolvency proceedings”.
Earlier this week The High Court of Justice of England and Wales sanctioned a Scheme of Arrangement under Part 26 of the UK Companies Act 2006 between Malaysia Airlines' leasing entity, MAB Leasing, and the majority of its aircraft operating lessors.
The scheme received the unanimous support of the relevant lessors and represents an important component of a wider restructuring exercise to reduce liabilities by more than MYR15 billion, said Malaysia Airlines parent Malaysia Aviation Group.
Covered under the scheme are group operating leases of eight Airbus A330 aircraft and 44 Boeing 737-800 aircraft, documents show.
This prompted Malaysian sovereign wealth fund Khazanah Nasional to commit MYR3.6 billion of fresh capital to Malaysia Aviation Group.
The group carried more than 12 million fewer passengers in 2020 than in 2019 and incurred a combined loss in the region of MYR3.24 billion in the financial year ended 31 December 2020, adding to many prior years of loss-making.