1. Protecting Aircraft Assets Following Default Integrated Aviation Finance School. Jackson Chow & Judy Tan, 12 January 2015, Shenzhen

2. William KK Ho & Co. Protecting Aircraft Assets Following Default Agenda 1.Review of Transaction Documentation (Security Documentation) 2.Notice of Default 3.Locating the Aircraft & Repossession 4.Security Interests and other Prior Interests 5.Sale 6.Deregistration 7.Foreign Jurisdictions 8.PRC Case Study

3. William KK Ho & Co. 1. Review of Financing Documentation Has an Event of Default occurred?  Default  Can the default be cured, grace periods expired Quiet Enjoyment Covenant – is this being breached? 2. Security Documentation Enforceability of security documentation Legal Opinions Security Packages

4. William KK Ho & Co. 3. Notice of Default Accuracy of default notice Service of notice 4. Locating the Aircraft and Repossession Repossession - Is a court order necessary? Locating the Aircraft Maintenance of insurances, aircraft maintenance; incurring costs in connection with Aircraft – who pays?

5. William KK Ho & Co. 5. Security Interests and other Prior Interests Prior interest? Repairman’s, maintenance, storage, repair, aviation charges 6. Remedies and Power of Sale Aircraft mortgage usually will provide for an express power of sale Private Sale Pre-judgment court sale 7. Deregistration Deregistration of the Aircraft as a condition to sale

6. William KK Ho & Co. 8. Foreign Jurisdictions Local Law Advice  Enforcement of local law securities – court appointed orders  Compliance with local law requirements regarding repossession  Liaison with regulatory authorities  Deregistration  Choice of law and jurisdiction  Peculiar Jurisdictional Requirements Foreign Conventions  Cape Town Convention – Creditors may exercise certain default remedies – sale, receive income from profits grant a lease  Remedies exercisable without a court order, unless Contracting State has declared otherwise

7. William KK Ho & Co. PRC Case Study - Repossession of Aircraft  Recent Cases  PRC Mortgages  PRC Mortgage is effective between Mortgagor and Mortgagee upon execution  Registration of Mortgage with CAAC – security perfection - ensures notice against third parties  Mortgage created on a leased aircraft - lease remains unaffected  Enforcement of the mortgage should not be affected by the existence of the lease, provided that the mortgage is duly registered with CAAC – NOTE quiet enjoyment covenants

8. William KK Ho & Co. Remedies  Enforcement of Judgment  “self-help” remedies are not available under Chinese law.  A creditor or lessor intending to retake possession must resort to judicial proceedings via a Chinese court.

9. William KK Ho & Co. Summary - PRC Judicial Process  Lessor/mortgagee to file an application for enforcement with the court of the first instance  Lessor or Mortgagee is required to pre-pay any court charges  property preservation orders may be granted (provided that Lessor/Mortgagee provide property preservation guarantee).  Evidence of claims to be submitted; Evidence of defence to be submitted.  Any evidence must be checked and verified before it can be taken as a basis for ascertaining a fact  Chinese translation is required if the transaction documents are not in Chinese  If application for enforcement accepted, the Chinese court could issue an enforcement order to lessee/mortgagor.

10. William KK Ho & Co. Enforcement of Foreign Judgments  Can an English or New York court judgment be recognized and enforced in China  As a general principle, the reciprocal recognition of foreign court judgments arises either by treaty between the PRC and country where such foreign court is located  In practice, bilateral treaties for recognition and enforcement of foreign judgments are only existent between China and a few countries (France and Spain, USA (only for criminal) for example); no such arrangement with many of the major trading partners including the UK, Japan,or Germany

11. William KK Ho & Co.  Foreign Arbitration Determinations  A foreign arbitration award can be recognized and enforced in China  “Arbitration” clause in the lease agreement or aircraft mortgage can be an alternative option  The PRC is a party to the New York Convention on the Reciprocal Recognition of Foreign Arbitral Awards (“New York Convention”)

12. William KK Ho & Co. Part 2: Protecting the Asset in a Default situation Basic checklist 1.Review of Financing Documentation & Security Documentation 2.Notice of Default 3.Locating the Aircraft & Repossession 4.Security Interests and other Prior Interests 5.Sale 6.Deregistration 7.Foreign Jurisdictions 8.PRC Case Study

13. Protecting Aircraft Assets Following Default William KK Ho & Co.