EQT's aircraft leasing company, one of the world's largest with hundreds of aircraft, has ended up on the brink of ruin but has recently received the go-ahead from lenders to defer interest payments of several billion.
”Now it's about having a long-term perspective and wintering the crisis,” the responsible EQT partner tells Di, while awaiting court approval of the loan settlement.
EQT, through one of its funds, is the largest owner of Nordic Aviation Capital (NAC), an aircraft leasing company that leases its fleet of around 500 aircraft to regional airlines. The company claims to be the largest regional player in the world and the fifth largest aircraft leasing company in the world.
Like the entire aviation sector, NAC has been hit hard by the pandemic, and has been forced to defer payments to many of its approximately 75 customers.
This has led to NAC having difficulty paying its creditors, and during the summer negotiations are underway regarding the debts in Irish courts, as NAC is based in Limerick, Ireland.
So far, things seem to be going EQT's way: according to a press releasefrom the company, creditors voted last week in favor of a settlement. This means that NAC will be granted a deferral of its interest payments and amortizations for 6–12 months.
The company does not want to disclose the amounts involved to Di, but according to the Irish Times wrote In June, debts amounted to more than 5 billion euros, 52 billion kronor.
The company's latest published annual report indicates loans of just under that amount a year ago, and financial costs of 333 million euros, equivalent to approximately 3.5 billion kronor per year at today's exchange rate.
EQT tells Di that the loans are spread across around 85 lenders, a handful of which are Nordic, but the venture capital company does not say who these are. However, it is clear that no financial reconstruction of the company is currently in question.
”"No, it's not about reconstruction," it says in an email.
Operationally, things are also starting to brighten, according to EQT:
”Today, around 20 percent of the fleet is being used, but we are starting to see an increase on a weekly basis,” says Morten Hummelmose, NAC-responsible partner at EQT in a written statement to Di about how the business is developing, and continues:
”"NAC's aircraft only fly regionally and generally speaking, it is the regional routes that recover first and we are monitoring developments closely."”
The court said, according to what the Irish Times wrote before the settlement, that June and July were also expected to be very weak months for the company.
As an overall comment, Morten Hummelmose says that EQT strongly believes in NAC's business model, that the basis of the business is sound, and that EQT hopes for a rapid recovery as soon as the crisis is over, although no one knows how long it will last.
”Now it’s about having a long-term perspective and winterizing the crisis – here the postponement plays an important role,” he says of the settlement, which according to EQT’s press release was unanimously accepted by creditors in the Irish High Court last week.
This after a large part of the lenders, according to what a representative for them said in June told the Irish Times opposed the structure of the proposal as it then was. What has now been passed, EQT tells Di, was a revised proposal for a settlement due to the opposition, which was ”voted through by an overwhelming majority”.
In May was lowered NAC's credit rating, but how the crisis has affected EQT's valuation of NAC, an investment that was made autumn 2015, Morten Hummelmose declines to comment.
In addition to EQT, which is the largest owner, founder Martin Møller, the Lego family's investment company Kirkbi and Singapore's sovereign wealth fund GIC own parts of NAC. The owners have committed to contribute $60 million as part of the debt settlement.
In February 2018, it reported Bloomberg or Reuters that NAC was for sale, something EQT then declined to comment on.
Source: di.se
