On 21 July 2020, the Irish High Court (Commercial Court) approved a Scheme of Arrangement (the "Scheme") for Irish based aircraft lessor, Nordic Aviation Capital DAC and its subsidiaries ("Nordic"), in respect of approximately US$5 billion in secured debt owed by Nordic to its lenders.  While Schemes of Arrangement have long been a part of Irish company law, it is the first use of its kind for an Irish aviation lessor.

Nordic is the world's largest regional aircraft lessor and owns approximately 500 aircraft serving 74 airline customers in 50 countries. 

It sought use of the Scheme to facilitate the debt restructuring of the group in light of the severe impact of the COVID-19 pandemic and the resulting deferral of rent payments from its airline customers.

Key aspects of the Scheme include:

  • Principal and interest payments to Nordic's lenders on over US$5 billion of secured, unsecured, export credit agency and private placement debt put on hold (standstill and deferment) for six to 12 months following the Scheme's approval date.
  • US$60 million equity injection into Nordic from its shareholders.
  • Elimination of a proposed, but uncommitted, five year capex programme worth over US$5 billion.
  • Deferring payments of US$1.5 billion of Nordic's committed capex programme.

The Scheme was implemented in respect of multiple financing facilities with various governing jurisdictions (including New York and England).

The approved Scheme was submitted to the New York Bankruptcy Court which has recognised the Scheme under Chapter 15 of the US Bankruptcy Code.

What is a Scheme of Arrangement?

A scheme of arrangement is a flexible debt restructuring tool that can be used by a company in financial difficulty to reach agreement with its creditors to repay all or part of its debts over an agreed timeframe.

It provides a structure for the negotiation of a scheme for, (i) the rearrangement of a company's capital structure amongst its members; and / or (ii) the rearrangement (or compromise) of a company's obligations and liabilities to its creditors.

Key Steps

a) The company provides the proposals for a Scheme of Arrangement to its creditors along with notice of the creditors meeting;

b) The holding of meetings of members and creditors of the company which are convened by the directors of the company or by the High Court;

c) Separate meetings must be held for each class of creditors or members;

d) The Scheme of Arrangement must be approved by a special majority representing 75% or more in value of the creditors / members present and voting for each class of creditors / members;

e) The High Court must sanction the resolutions of the creditors / members approving the Scheme of Arrangement; and

f) Debts of the company are written down in line with High Court sanctioned proposals.

A Scheme of Arrangement is separate and distinct from the Irish examinership process.  Unlike examinership, it does not require that a company is insolvent or likely to be insolvent in order for an application to be made. 

A Scheme of Arrangement has certain advantages over an examinership in that:

a) The company is allowed to keep trading;

b) It is a more cost effective process, as there is less court involvement (i.e. no need for approval of the High Court to enter the process and no need to prove to the High Court that there is a 'realistic prospect of survival');

c) There is no requirement to appoint an examiner;

d) There is no need for an Independent Expert's Report to initiate the process; and

e) There will be less publicity as there is no investigation into the company's affairs by a court appointed examiner.

The Cape Town Convention ("CTC") and Schemes of Arrangement

An important question arises regarding the interplay of Irish Schemes of Arrangement and the CTC.  Ireland adopted the Alternative A insolvency regime of the Protocol to the CTC (the "Protocol") in 2017, which is designed to take precedence over local law insolvency rules in respect of aircraft objects.  Article XI (10) of the Protocol provides that "no obligations of the debtor under the agreement may be modified without the consent of the creditor" (i.e. each creditor, rather than the 75% required under a Scheme of Arrangement).  A number of Nordic's secured creditors had registered 'international interests' under the CTC and the question arose as to whether the holders of such interests would be bound by the Scheme if they did not vote in its favour.

Nordic submitted that the proposed Scheme of Arrangement would not fall under the definition of "insolvency proceedings" or "insolvency-related events" (as defined in the Protocol) and, as such, Alternative A should not apply to the Scheme.

The High Court considered the facts of the case and held that it had jurisdiction to sanction the Scheme as (i) there was the overwhelming support of creditors (over 90% voted in favour) (ii) there were no dissenting votes and (iii) those who had not voted were deemed to have given their implied consent.

As there were no dissenting voters and all creditors had provided either express or implied consent to the Scheme, the High Court did not consider it necessary to determine whether an Irish Scheme of Arrangement was an "insolvency proceeding" or an "insolvency-related event" under the Protocol.

It should be noted, however, that the Cape Town Academic Project has indicated an intention to provide in the Official Commentary for the CTC that Schemes of Arrangements (among other proceedings):

"fall within the definition of 'insolvency proceedings' in the Convention where they are proceedings that (a) are formulated in an insolvency context, or by reason of actual or anticipated financial difficulties of the debtor company, and (b) are collective in that they are concluded on behalf of creditors generally or such classes of creditor as collectively represent a substantial part of the indebtedness"

It remains to be seen if such statements will temper the use of Irish Schemes of Arrangement, specifically where there are dissenting creditors willing to challenge pursuant to Alternative A.


The approval of the Scheme has demonstrated that Irish Schemes of Arrangement can be used as a flexible, efficient and cost effective tool for complex international debt restructurings.  The Scheme also showcases Ireland's ability to act as the jurisdiction of choice for such restructurings.

The Scheme highlights the potential for aircraft leasing companies to consider using a Scheme of Arrangement to restructure their debts, however, noting the possible issues around Alternative A, should there be creditor objections.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.