Published on : Thursday, August 6, 2020
As the global aviation sector continues to fight against the challenges posed by the COVID-19 crisis, U.K.-based airline Virgin Atlantic recently filed for bankruptcy in the United States seeking protection under chapter 15 of the U.S. bankruptcy code. The action is designed to allow a foreign debtor to shield assets in the country. The decision comes weeks after the airline secured a comprehensive recapitalisation.
Shareholders and equity investors has already injected £1.2 billion in the airline, allowing it to resume flight operations from mid-July. The carrier mentioned in a U.S. bankruptcy court filing that it had sought to negotiate a deal with stakeholders for a consensual recapitalisation that will get debt off its balance sheet. The airline is hopeful that hoped the latest decision will immediately position it for long-term sustainable growth.
On Tuesday, Virgin Atlantic obtained approval for a separate action filed in a British court that is tied with the filing in order to convene meetings of affected creditors to vote on the plan on August 25. Around the month of May, Virgin Atlantic, 51% of which is owned by Virgin Group and 49% by US airline Delta, announced that it would cut more than 3,000 jobs in the U.K. and close its operation at Gatwick airport. Virgin added it was continuing to operate a limited schedule flying to Hong Kong, New York, Los Angeles and Barbados from its London Heathrow base and forthcoming flight and holiday bookings continue to stay valid.
Virgin Atlantic said in a statement that 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. It also stated with support already secured from the majority of stakeholders, the restructuring plan and recapitalisation is expected to come into effect in September.