Virgin Atlantic has today shared an important update in its billion-dollar restructuring plan. The United Kingdom-based carrier has announced that its creditors have voted in favor of its proposal to get its finances back on track amid the impact of the global health crisis.
Adapting to the challenges
It has been well-publicized that the airline is going through a solvent recapitalization in British courts. Additionally, it also applied for Chapter 15 bankruptcy protection in New York to protect its assets in the United States.
In a press release seen by Simple Flying, a Virgin Atlantic spokesperson highlighted that this vote is a significant milestone in safeguarding the company’s future. Altogether, it has received considerable support from all four creditor classes.
These groups are divided by the following:
- Creditors under Virgin Atlantic’s revolving credit facility
- Aircraft lessors
- Shareholders
- Certain of the airline’s trade creditors
The next stage
There will be an English High Court hearing on September 2nd to sanction the restructuring plan. Nonetheless, the operator is satisfied that the proposal is the best answer to the issues that it faces.
“We remain confident that the plan represents the best possible outcome for Virgin Atlantic and all its creditors and believe that the court will exercise its power to sanction the Restructuring Plan, at a hearing scheduled on 2 September,” the spokesperson said in the press release.
“A US Chapter 15 procedural hearing will follow on 3 September, ensuring Virgin Atlantic’s Restructuring Plan is recognised in the US, paving the way for the £1.2bn private only, solvent recapitalisation of Virgin Atlantic.”
Altogether, Virgin Atlantic hopes that there will be a boost in customer confidence as it looks forward to serving more passengers across its operations as flight activity picks up again. The restructuring project is based on a five-year business plan. Ideally, it will pave the way for the airline to rebuild its balance sheet and return to profitability from 2022.
Breaking it down
The plan will deliver a refinancing package that is worth £1.2 billion ($1.57bn) over the next 18 months. Several of the group’s stakeholders are offering strong financial support as part of the process.
Shareholders are delivering £600m ($788m), including a £200m ($263m) investment from the Virgin Group, along with the deferral of £400m ($525m) of shareholder deferrals and waivers. Additionally, a new partner, an investment company named Davidson Kempner Capital Management LP, is giving £170m ($223m) of secured financing.
Moreover, creditors are helping out with over £450m ($590m) of deferrals. Credit card acquirers are also offering their full support.
Above all, September is lining up to be a crucial month for Virgin Atlantic. US court proceedings will continue on September 3rd, while the UK court process will progress through the month.
Regardless, today’s update is vital for the company as it has previously shared that its finances would reach critical levels next month if it could not secure funding. As the circumstances revolving the pandemic continue to change, any assistance would be valuable in the current conditions.
What are your thoughts about Virgin Atlantic’s restructuring plan? How do you see the airline progressing amid the impact of the global health crisis? Let us know what you think of the situation in the comment section.
