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Caveat Lessor: U.S. Aircraft Financiers Beware - 11 U.S.C. § 1110 Expectations May Not Be Met In Cross-Border Insolvencies, Kevin Gaunt

Kevin Gaunt

The Viação Aérea Rio Grandense (“Varig”) airline judicial recuperation in Brazil was the first major test case under the New Bankruptcy and Restructuring Law of Brazil (“the NBRL”), ratified in February of 2005 and going into effect on June 9, 2005. The experience was largely negative for aircraft and engine lessors and creditors, most of whom were United States-based and accustomed to special protections afforded them by 11 U.S.C. § 1110, which specifically provides greater protection to aircraft owners in bankruptcy procedures than other secured creditors enjoy. In the United States, an aircraft creditor may use § 1110 to circumvent …