By Franklin H. Top III, Stephen R. Tetro, Richard F. Klein, James M. Heiser (Chapman and Cutler LLP)
Hundreds of billions of dollars are invested in aircraft equipment in the United States. With the airline industry suffering devastating losses resulting from the COVID-19 pandemic, Chapman and Cutler LLP recently released its Bankruptcy and Aircraft Finance Handbook. The handbook aims to help aircraft investors navigate the numerous challenges typically faced in airline bankruptcies. The handbook seeks to provide an understanding of the unique aspects of § 1110 of the Bankruptcy Code and other related provisions that govern the treatment of claims in bankruptcy involving aircraft. It also outlines the state law remedies available to aircraft investors outside of bankruptcy.
In addition, the handbook seeks to demystify the complex structures behind these investments, including secured loans, sale/leasebacks, operating leases, pass-through certificates, leveraged leases and public debt, including equipment trust certificates or enhanced equipment trust certificates. Each structure can present its own unique challenges in bankruptcy.
We also provide a checklist of considerations for aircraft investors drawn from over 30 years of experience, and identify some of the common challenges that investors face in airline bankruptcies. We provide investors with an understanding of the legal protections available in the event an aircraft investment heads south, as well as share lessons learned from prior airline bankruptcies from the 1990s to the present
The full article is available here.