Virgin Atlantic airline files for U.S. bankruptcy protection

Marco Green
August 5, 2020

Virgin Atlantic said it needed to recapitalise "to not only survive the exigent threats posed by the Covid-19 global pandemic but to thrive once the immediate global health crisis passes".

The Virgin Group airline filed for Chapter 15 bankruptcy protection in the Southern District of NY on Tuesday.

Reuters reports that Virgin Atlantic filed under Chapter 15 of the US Bankruptcy Code in the southern district of NY on August 14th. That process would be going ahead with the support of the company's majority creditors.

"Working with Bain Capital, we will accelerate our plan to deliver a strong future in a challenging domestic and global aviation market", Virgin Australia's chief executive Paul Scurrah said.

"Passenger demand has plummeted to a level that would, until recently, have been unthinkable". Virgin Atlantic also owns Virgin Atlantic Holidays, a tour operator business and Virgin Atlantic Cargo.

He added: "It is projected that the group would run out of money altogether during the week commencing 28 September 2020". Failing that, the airline will be placed under administration.

He said: "This would result in a poor outcome for the company's creditors - especially its unsecured creditors - since the value of the company's assets and business would likely be subject to a significant reduction in the event of a formal insolvency proceeding".

Branson's Virgin Group will provide 200 million pounds, while Delta Air Lines, which owns 49 per cent of the airline, has agreed to defer payments due to it. The deal will go within weeks for final approval to a meeting of Virgin creditors who are owed 7 billion Australian dollars ($5 billion).

This announcement comes soon before Virgin Australia, the other Virgin Group airline, is set to announce its own restructuring plan.

Just hours earlier, Virgin Atlantic said during a court hearing in London that it would run out of cash next month unless a GBP1.2 billion pound (USD1.6 billion) rescue deal was approved.

The UK-based airline is seeking protection under chapter 15 of the U.S. bankruptcy code, which allows a foreign debtor to shield assets in the country.

The turnaround plan for Australia's second largest airline will also see it retire the budget brand Tigerair.

The carrier said that the recapitalization plan would be deployed over 18 months and has the support of shareholders, new investors and existing creditors.

The company had said during proceedings in the United Kingdom that it planned to apply for the USA protection while it finalizes a rescue plan that's already supported by a majority of its stakeholders.

Other reports by Click Lancashire

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