Virgin Atlantic gets US court protection from creditors as part of reorganisation plan
Virgin Atlantic’s filing in US bankruptcy court in the southern district of New York said it has negotiated a deal with stakeholders 'for a consensual recapitalisation' that will get debt off its balance sheet and 'immediately position it for sustainable long-term growth'. Picture: Steve Parsons/PA Wire
Virgin Atlantic Airways is seeking protection from creditors in the US under Chapter 15 of the US Bankruptcy Code, which allows a foreign debtor to shield assets in this country, according to a court filing.
Virgin Atlantic’s filing in US bankruptcy court in the southern district of New York said it has negotiated a deal with stakeholders “for a consensual recapitalisation” that will get debt off its balance sheet and “immediately position it for sustainable long-term growth”.
In July, Virgin Atlantic said it has agreed a rescue deal with shareholders and creditors worth £1.2bn to secure its future beyond the coronavirus crisis.
The US filing is an ancillary proceeding tied to a separate action filed in a British court, where Virgin Atlantic obtained approval to convene meetings of affected creditors.
An airline spokeswoman said the restructuring plan was before a British court “to secure approval from all relevant creditors before implementation”.
She added the “process is proceeding with the support of the majority of our creditors”.
Non US-companies use Chapter 15 to block creditors who want to file lawsuits or tie up assets in the US.
In July, the airline said its private deal with stakeholders eliminates the need for support from the British government that billionaire founder Richard Branson had sought.
The reorganisation is expected to be completed towards the end of this summer and be spread across the next 18 months.
The airline, 51% owned by Branson’s Virgin Group and 49% by US airline Delta, closed its Gatwick base and cut more than 3,500 jobs to contend with the fallout from the Covid-19 pandemic, which has grounded planes and hammered demand for air travel.
“Delta said it supported the plan and was “optimistic” that it would help Virgin Atlantic “maintain its position” in the travel market.
