It has today been announced that Virgin Atlantic is set to receive £200 million of immediate funding from the Virgin Group. The commitment, along with additional shareholder support, comes as the struggling airline urgently tries to secure a £1 billion refinancing package this month.
Virgin Atlantic secures £200m in funding
The Financial Times reports today that Sir Richard Branson’s Virgin Group is to provide Virgin Atlantic with £200m ($248m) of immediate funding to help secure the future of the airline. In addition to the cash injection, according to Virgin insiders, an additional £400m ($496m) of support from shareholders has also been committed.
As international air travel struggles to slowly recover from the COVID-19 pandemic, the funding will help to boost the cash reserves of the troubled airline as it tries to complete a £1bn ($124bn) multi-faceted rescue package.
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The extra £400m of financing will be from Delta Airlines, a 49% shareholder in Virgin Atlantic. The Virgin Group, with 51%, is the majority shareholder. Delta had previously said that it wouldn’t be funding Virgin Atlantic as it prioritized its own future in the face of the coronavirus crisis.
To ensure that Virgin Atlantic’s current shareholding structure doesn’t change, Delta’s commitment will probably be in the form of deferred payments for shared back-office and IT platforms and brand fees.
Virgin Atlantic races to secure £1bn rescue package
Virgin Atlantic is urgently trying to finalize its £1bn refinancing package early in July. In addition to the £600m pledged by existing shareholders, £250m in debt funding from private investors is expected to form a key part of the rescue deal.
The airline is in talks with hedge funds, Elliott and Davidson Kempner Capital management. The US private equity group Centerbridge Partners has re-entered negotiations over the weekend.
Other parts of the refinancing package include negotiations over the deferment of fees from aircraft lessors and regulators, along with talks with credit card issuers, which are withholding around £250m in funds.
Simple Flying reached out to Virgin Atlantic for comment. A spokesperson said,
“Virgin Atlantic has been working on a comprehensive, solvent recapitalization of the airline to ensure that we can continue to provide essential connectivity and competition to consumers and businesses in Britain and beyond. Since the very beginning of the Covid-19 crisis, we have made difficult decisions and taken decisive action to reduce our costs, preserve cash and protect as many jobs as possible.
“We greatly appreciate the support of our shareholders, creditors and private investors and by working together, we will ensure that Virgin Atlantic can emerge from the crisis a sustainably profitable airline, with a healthy balance sheet.”
Virgin Atlantic hit hard by the pandemic
Virgin Atlantic, which last month celebrated its 36th birthday, has been among the hardest hit airlines during the coronavirus pandemic. Although some routes are scheduled to resume in July, the airline has previously said that its fleet might have to remain grounded until August.
The carrier approached the UK government for a £500m commercial loan package, which was declined. Since then, it has focused its attention only on private, solvent recapitalization. The airline said that recapitalization requires approvals, but that it is making very good progress.
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