Virgin Atlantic hailed “an important milestone” in its court-sanctioned restructuring following a legal hearing in the US today.
This followed a UK court hearing on Tuesday which was wrongly reported in some quarters as an insolvency hearing.
Virgin Atlantic went to court as part of a recapitalisation process agreed by creditors under the UK Companies Act.
The US hearing was under Chapter 15 provisions which allow a US court to recognise a foreign restructuring process and offer protection against creditors while the restructuring is underway.
A Virgin Atlantic spokesperson said: “Virgin Atlantic has reached another important milestone towards securing its future, undertaking a hearing in the US courts to support its plan for a recapitalisation of the airline.”
The spokesperson described it as “a standard procedural step to protect the airline’s assets while Virgin Atlantic’s recapitalisation is completed in the UK” and said: “The US court has supported the company’s restructuring plan.”
The US court scheduled a further hearing for September 3 to follow the final hearing before the English court.
The spokesperson said: “With support already secured from the majority of our creditors and stakeholders, it’s expected the Restructuring Plan and solvent recapitalisation will come into effect in September. We remain confident in the plan.”
The restructuring was announced on July 14.
Majority owner Virgin Group and co-owner Delta Air Lines, which owns 49% of Virgin Atlantic, will provide £600 million in support.
This includes £200 million in new investment by Virgin Group, raised by the sale of shares in Virgin Galactic, and £400 million in payment deferrals and waivers by Virgin and Delta, which confirmed it had written off $200 million on its investment.
US hedge fund Davidson Kempner Capital Management will provide £170 million in new funds secured against Virgin Atlantic’s assets – chiefly slots at Heathrow.
The airline’s creditors, including aircraft lessors, have agreed to “over £450 million of deferrals” on payments, and Virgin Atlantic confirmed it has the “support of credit card acquirers Lloyd’s Cardnet and First Data”. The card firms had been withholding payments from the airline.
The total refinancing package is worth about £1.2 billion over the next 18 months.
The deal makes use of a court-sanctioned process under the Corporate Insolvency and Governance Act which came into force on June 25
It is accompanied by a five-year business plan which envisages Virgin Atlantic returning to profitability from 2022 onwards.
The restructuring includes cost cuts of about £280 million a year and the carrier will re-phase and refinance planned aircraft deliveries over the next five years.
Virgin Atlantic is currently operating a limited schedule, flying to Hong Kong, New York, Los Angeles and Barbados from Heathrow.
However, it plans to add destinations through August and September.
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