Can Airlines Seek Relief under EETC Financing?

Due to the ongoing COVID-19 pandemic and the resulting economic malaise, lenders and investors are seeing a flood of requests from borrowers and issuers for relief on debt service payments. For private financings where there is generally a small syndicate of participants or group of investors, such requests are often obliged, for any number of reasons, including concern that a borrower or issuer will purposely default. Holders of publicly traded securities, on the other hand, have historically been immune to such requests. Enhanced equipment trust certificates (EETCs, pronounced “double-E-T-C”), which are publicly traded airline-issued and aircraft-secured debt securities, are likewise generally immune to such requests.

Lawyers in the Vedder Price Global Transportation Finance Team, nevertheless, have been fielding questions from clients about the likelihood of airline issuers seeking debt relief, including forbearances, on their EETCs, whether in or outside of bankruptcy proceedings. We have been counseling our clients that it is nearly impossible for airline issuers of EETCs to obtain debt relief from the holders of the EETC securities. We explain the rationale for that conclusion in this Article...