The United States tax authority, the Internal Revenue Service (IRS), has filed a last-minute appeal against the exit of Limerick-based aircraft lessor Nordic Aviation Capital from a Chapter 11 case.
The move comes just days before a final hearing scheduled for April 19 asking a U.S. court to approve a deal aimed at selling the sub-$6.3 billion ($5.8 billion) aircraft leasing business. EUR) to get rid of debts by passing them on to lenders.
The IRS filed its filing with the court overseeing the process on April 13, objecting to some technical aspects of the agreement.
The outstanding tax liability is modest, around $250,000, and IRS intervention included a proposed resolution and an opportunity to make the change before Tuesday’s hearing.
This should be enough to ensure that the process is not thrown off track by the move.
NAC began its bankruptcy proceedings in the United States on Dec. 19 after reaching an amicable settlement with lenders who hold more than 73% of the lessor’s $6.3 billion debt.
It is understood that NAC has now received the support of over 99 percent of the funded creditors and will proceed with the confirmation hearing as planned.
This will set out the terms of a core agreement that includes a radical restructuring of NAC’s debt obligations, including the conversion of a significant amount of debt to equity and an injection of $537 million in fresh capital via a $337 million stock offering and $200 million revolving credit facility.
NAC is the world’s largest lessor of regional aircraft with a fleet of 500 aircraft.
The Covid lockdowns and travel restrictions of 2020 and 2021 have hit this business hard.
A court filing filed earlier this year detailed a massive $1.2 billion loss incurred last December when Chapter 11 bankruptcy proceedings were filed, largely due to a so-called non-cash impairment of $890 million booked during the period.
The company posted a loss of $2.3 billion in the 12 months ended June last year.
Detailed updates must be submitted to the court as part of the insolvency proceedings.
NAC had more than $491 million in cash on its books at the end of December, including fresh money from lenders, filings with the U.S. court show.
The company has also made a series of management changes with the appointment of Norman Liu, a former senior Gecas executive, as the company’s president, followed by further appointments of senior aviation executives.
The Chapter 11 process is relatively complex, including some NAC 15 American-based affiliates spread across three states, Colorado, Delaware and Florida, and the cross-border role of the Irish parent company.
Chapter 11 offers companies protection from creditors and corporations whilst debt is being reorganised, but unlike here in Ireland, companies do not have to be insolvent to benefit from the procedure.
This makes the procedure, at least in some cases, more attractive than the exam, which is the potential alternative here.
Ultimately, NAC and its lenders decided to seek legal protection in Virginia, USA.
Under the Chapter 11 proceedings, the reorganized NAC will be majority-owned by its largest creditors.
https://www.independent.ie/business/world/irs-raises-late-objection-to-nacs-chapter-11-exit-41555259.html IRS late objection to NAC’s Chapter 11 exit