More details of the country’s debut airline bankruptcy are emerging as King & Wood advises the creditor in its claims on its debt-ridden carrier.
Defaulting on payments up to US$73.5m, the East Star Airlines liquidation proceedings commenced at The Intermediate People’s Court (Wuhan) in March 2009. The court acted on behalf of General Electric’s aviation subsidiary GE Commercial Aviation Services (GECAS) and five other creditors – including China National Aviation Fuel, Airbus and several domestic airports – followed GECAS’s lead.
King & Wood initiated the bankruptcy application on behalf of GECAS. “East Star owed a substantial amount of rent to GECAS and after repeated requests for payment, the airline still failed to pay up. We then initiated the bankruptcy proceedings and the rest of the creditors followed,” said Zhang Shouzhi, partner at King & Wood.
In the hopes of getting back their money, creditors have been mulling over the airline’s possible business restructure with word of Air China’s step-in last year. “The proposal by Air China for the acquisition of East Star was negotiated and failed well before the bankruptcy proceedings commenced,” said Zhang.
Several other airlines remain active in Wuhan: China Eastern Airlines and China Southern Airlines have subsidiaries in the city. China Southern holds 48% of the local market and China Eastern holds 18%. East Star had 11% and Air China, which has been increasingly interested in the Wuhan market, holds 5%.
King & Wood is a long-term legal advisor to GE. Run Ming partner Gavin Wang together with Clifford Chance acted for Airbus in East Star’s bankruptcy.
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