Virgin Atlantic moves one step closer to survival
Virgin Atlantic has moved one step closer to survival after making legal submissions either side of the Atlantic to restructure its finances.
Sir Richard Branson's 36-year-old airline made a Chapter 15 filing in US federal bankruptcy court in New York after a proceeding in the UK.
Virgin Atlantic said the filing was part of a court process in the UK to carry out a restructuring plan that the airline announced last month.
The process is supported by a majority of creditors and the carrier hopes to emerge from the process in September, the airline said.
A Virgin Atlantic lawyer said in a court filing that the company needed an order from a US court to make terms of the restructuring apply in America.
It came as a London court was told the carrier will run out of cash next month unless it secures approval for a £1.2bn rescue package it announced in July.
Without a restructuring and injection of new funds, the airline's available cash will drop to "critical levels" by the middle of next month and it will "run out of money altogether" by the week beginning September 28, Virgin's lawyer told a judge.
A spokesman for the airline said: “Virgin Atlantic attended court [on Tuesday] as part of a solvent recapitalisation process under 26(A) of the UK Companies Act 2006. That process is proceeding with the support of the majority of our creditors.
“Following the UK hearing, ancillary proceedings in support of the solvent recapitalisation were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognise foreign restructuring processes.
“In the case of Virgin Atlantic, the process we have asked to be recognised is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006.”
After being refused a state bailout by Chancellor Rishi Sunak, the rescue deal includes a £200m injection from Sir Richard, while Wall Street hedge fund Davidson Kempner will provide loans of about £170m.
A further £400m will come from the deferral of fees owed to the Virgin Group and the airline’s minority shareholder Delta over the next three to five years.
However, the rescue plan still has to be given the go-ahead by creditors at a meeting on August 25 and then approved at a hearing scheduled for September 2.
If the restructuring fails to get clearance, Virgin will be placed into administration mid-month with any assets sold, David Allison, a lawyer for the company, told the court.
Some 3,150 Virgin Atlantic jobs will still need to be cut under the plan.
Virgin's sister airline Virgin Australia, which Sir Richard founded and still holds a 10pc stake in, filed for protection from creditors in April.
