The British Airline, Virgin Atlantic Airways Ltd, is seeking protection from US creditors under Chapter 15 of the U.S. Bankruptcy Act, which allows a foreign debtor to protect assets in that country.
Virgin Atlantic negotiated an agreement with stakeholders at the US bankruptcy court in southern New York “for a consensual recapitalization” that will get debt off its balance sheet and “immediately position it for sustainable long-term growth.”
In July, Virgin Atlantic announced that it had signed a £1.2 billion ($1.57 billion) bailout agreement with shareholders and creditors to secure its future beyond the coronavirus crisis.
The U.S. filing is an ancillary to a separate lawsuit in a British court where Virgin Atlantic was given permission on Tuesday to convene assemblies of affected creditors to vote on the plan on August 25.
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An airline spokesman said the restructuring plan was before a UK court “to seek approval from all relevant creditors before implementation.” She added: “The process runs with the support of the majority of our creditors.”
Bloomberg reported that Virgin Atlantic had told a London court that no funds would be available in September unless a restructuring agreement was approved.
Non-US companies use Chapter 15 to block creditors who want to file suit or tie assets in the United States.
In July, the airline said its private stakeholder deal eliminates the need for the British government’s support that billionaire founder Richard Branson had sought.
The restructuring is expected to be completed by the end of this summer and will be spread over the next 18 months.
The airline, 51% owned by the Bransons Virgin Group and 49% owned by the U.S. airline Delta, closed its base in Gatwick and cut more than 3,500 jobs to address the aftermath of the COVID-19 pandemic, grounded the aircraft and dampened the demand for air travel.
“Delta said it supported the plan and was” optimistic “to help Virgin Atlantic” maintain its position in the travel market. “
Virgin Atlantic said it needed to be recapitalized “not only to survive the pressing threats posed by the global COVID-19 pandemic, but to thrive once the immediate global health crisis is over.”
It was added in a court that reservations decreased 89% year over year and current demand for the second half of 2020 is around 25% of the 2019 level.
Virgin Atlantic also owns Virgin Atlantic Holidays, a tour operator and Virgin Atlantic Cargo.
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