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Virgin Atlantic Secures Future With Comprehensive Private Recapitalization Plan

Virgin Atlantic announced on Tuesday a private recapitalization plan which will ensure the carrier’s solvency as it prepares for a post-pandemic future. The court backed five-year restructuring plan will be supported by shareholders Virgin Group and Delta Air Lines.

Virgin Atlantic Boeing 787 Dreamliner - Courtesy Boeing

Today (July 14, 2020), Virgin Atlantic announced a major milestone with plans for a private-only comprehensive recapitalization plan which will secure the carrier’s post-pandemic future. The company has launched a court-backed recapitalization process for the airline and holiday business that once approved and implemented, will ensure Virgin Atlantic’s future. Based on a five year business plan with the support of stakeholders Virgin Group and Delta as well as new private investors and current creditors, the restructuring aims to return the airline to profitability by 2022.

In addition to liquidity measures already taken, the recapitalization plan will deliver a financing package worth around £1.2 billion over the next 18 months. Over the life of the plan shareholders will provide about £600 million in support including a £200 million investment from Virgin Group and £400 million in shareholder deferrals and waivers. Additionally, Davidson Kempner Management LP, a global investment management firm, will provide £170 million in secured financing. Creditors of the airline will defer over £450 million in payments and the plan is supported by credit card processors Lloyd’s Cardnet and First data. In Tuesday’s announcement, Virgin Atlantic’s CEO, Shai Weiss said,

“Few could have predicted the scale of the Covid-19 crisis we have witnessed and undoubtedly, the last six months have been the toughest we have faced in our 36-year history. We have taken painful measures, but we have accomplished what many thought impossible. The solvent recapitalization of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond. We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline, with a healthy balance sheet. Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect. Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards we set for ourselves, but we will do everything in our power to earn back their trust. While me must not underestimate the challenges ahead and the need to continuously respond to the crisis, I know that now, more than ever before, our people are what sets us apart. I have been humbled by their support and unwavering solidarity throughout. The pursuit of our vision continues and that is down to each one of them.”

Virgin Atlantic must receive approval from all relevant creditors before implementation and the Restructuring Plan will undergo a court-sanctioned process under Part 26A of the UK’s Companies Act of 2006. The carrier has already secured the support of the majority of stakeholders and expects the Restructuring Plan and recapitalization to be completed by the end of summer 2020. From what we understand, the process is roughly equivalent to a pre-packaged voluntary U.S. Chapter 11 Bankruptcy filing, which allows the business to continue as normal while it restructures, through an injection on new capital in the form of debtor-in-possession (DIP) financing and various creditor and stakeholder concessions.

Source: Virgin Atlantic


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