BY Fraser Tennant
At a time when coronavirus (COVID-19) is having a severe impact on the aviation industry, Virgin Atlantic Airways is seeking protection from creditors in the US under Chapter 15 of the US Bankruptcy Code – a mechanism that allows US courts to recognise foreign restructuring processes.
In the court filing, the beleaguered British airline stated that it had negotiated an agreement with stakeholders that would allow for “a consensual recapitalisation” that would remove debt from its balance sheet and “immediately position it for sustainable long-term growth”.
The Chapter 15 filing is alongside proceedings in a UK court, which saw the airline obtain approval earlier this week for affected creditors to vote on the restructuring plan. The vote is scheduled to take place on 25 August.
“In order to progress the private-only solvent recapitalisation of the airline, the restructuring plan is going through a court-sanctioned process under Part 26A of the Companies Act 2006, to secure approval from all relevant creditors before implementation,” said a Virgin Atlantic spokesperson. “With support already secured from the majority of stakeholders, it is expected that the plan, and recapitalisation, will come into effect in September. We remain confident in the plan.”
The restructuring plan – agreed with stakeholders on 14 July – will deliver a refinancing package worth around £1.2bn over the next 18 months, including cost savings of approximately £280m per year and an estimated £880m rephasing and financing of aircraft deliveries over the next five years.
Once approved and implemented, Virgin Atlantic expects the restructuring plan to help it to return to profitability from 2022.
One of many players operating in an industry to be majorly impacted by COVID-19, Virgin Atlantic – 51 percent owned by Richard Branson’s Virgin Group and 49 percent by US airline Delta – closed its Gatwick base in May and cut more than 3500 jobs in an attempt to absorb the devastating fallout from the pandemic, which has grounded planes and decimated demand for air travel.
“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect,” said Shai Weiss, chief executive at Virgin Atlantic, when the restructuring plan was announced last month. “While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, the pursuit of our vision continues.”
News: Virgin Atlantic Airways seeks U.S. Chapter 15 bankruptcy protection