If Norway gets the green light after a court hearing on December 7, experts believe the airline has a good chance of survival. However, the bankruptcy lawyer believes the current shares are worth zero.
When Norway filed a lawsuit against bankruptcy in an Irish court, it started ticking the clock. Within 150 days, the airline will have to find a rescue.
But to get protection within that period, the company needs to get the green light before the court, following a hearing on Monday, December 7, in Dublin.
Judge Michael Quinn announced his intention to take a stand on Thursday. It includes the total or partial cancellation of all debt, in exchange for shares, and the collection of billions in new capital.
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Think that Norwegians get the green light
Amanuensis Alexandros L. Seretakis at Dublin Trinity College, one of the areas specializing in Irish company law, believes that the airline has good opportunities to do so.
– I think the court will accept it because the Norwegians have reasonable chances of survival. Eventually, they will probably write off the debt and find new capital for an investor. They will probably continue as a smaller company, Seretakis told E24.
– As long as they manage to present a viable plan for Norway, I think they will do so in order to reduce debt and find new capital. They will surely say that it is a cover that has been destructive for the company, so that Norwegians can continue in a world without shelter, he added.
These two Irish gentlemen decide the fate of the Norwegian
On the edge of the cliff
Norwegian has launched a comprehensive rescue operation this spring, but has learned that the company needs more capital to recover from the crisis.
Pandemic-induced travel reductions reduced the number of passengers by 91% and caused a deficit of NOK 6.4 billion in Norway in the second and third quarters.
However, the airline refused this autumn to ask the state for direct support of millions of euros, and on 18 November the company applied for protection for Irish subsidiaries under a so-called “examiner” scheme.
This means that creditors cannot collect their claims or file for bankruptcy if the company has the backing of the court.
The Norwegian will be able to continue with the process through operations, which is one of the advantages, Seretakis noted.
Norway is without money in January without bankruptcy protection
He needs to convince the judge
According to attorney Gavin Simons, most companies that are fully supported in the “examiner” process get a business restructuring.
He works as a partner in the law firm AMOSS in Dublin, restructuring companies.
The company is a member of the alliance with the international law treaty Interlaw, and Haavind is a Norwegian law firm.
– The point is not to “leave the exam and wait to see if there are any good chances of survival.” Simons says that from the outset, the court must be convinced that there are reasonable chances of success in order to confirm the appointment of an “examiner”.
The person appointed by the court as the examiner (examiner) has the main task in the work of sewing the rescue plan. KPMG auditor Kieran Wallace has been given the task of Norway.
– In general, only qualified companies come out of the start door. The lawyer said that if they get out of the initial doorstep and secure the necessary investment, they have a very good chance of eventually passing the examination process.
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According to Simons, today’s shareholders are the ones who care least about the court.
Since the Norwegian applied for bankruptcy protection, the share has fallen by 20 per cent, but the market capitalization is still NOK 1.4 billion. Even small Nordic savers continue to buy into the company.
– They have a profit advantage in the company, and they must also suffer the consequences of loss. When they go to court and say the company is insolvent, the value of that stake is zero, the lawyer says.
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During his time in court, the auditor will have to find a solution, including reducing debt inflows and injecting new capital into Norwegian.
– It needs to secure a new investment, formulate a proposal to settle the debt, convene meetings in different classes of creditors, submit proposals to vote, Simons says.
It will then suffice for a class of creditors to accept the solution. It will also bind other creditors.
– It is necessary to have a scheme approved by the court with the minimum level of support, and binding on all creditors, whether they voted for or against the treatment they receive under the debt regime, says the lawyer.
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In the process the creditors are divided into groups. They will only cover part of the claim they will be charged, called a “dividend”.
– Instead of paying 100 percent, you can pay 5 percent of the debt to unsecured creditors, so that priority creditors, such as tax authorities, can get 15-20 percent.
However, creditors cannot be worse off than in a bankruptcy situation, as the company splits up and gradually sells out, so-called liquidation. In a recent court report, creditors predicted a loss of NOK 64 billion in the event of bankruptcy.
– The dividend paid must be at least the same as that received by the creditors in the liquidation of the company. The lawyer says he takes care of historical obligations.
He stressed that the company will also have to clean up future obligations, such as renting planes.
“The review process will manage historical obligations, but in the future it will need to lay a solid foundation for the company to be profitable in the future,” says Simons.