UK long-haul airline Virgin Atlantic has today had its restructuring plan approved by the English High Court. The plan, worth £1.2 billion ($1.6 billion), will see the airline receiving cash injections as well as implementing cost-saving measures in a bid to turn its fortunes around and return to profitability. The sanction comes around a week after the plan secured overwhelming support from the airline’s shareholders and creditors.
Virgin Atlantic has been granted the lifeline it needs today as it has confirmed that its £1.2 billion ($1.6bn) rescue plan has been sanctioned by the English High Court. The court hearing, which took place this morning, was presided over by Judge Richard Snowden, who gave the airline the go-ahead for its restructuring plan to weather the COVID crisis.
A Virgin Atlantic spokesperson told Simple Flying,
“In order to complete the private-only, solvent recapitalisation of the airline, our Restructuring Plan has gone through a court-sanctioned process under Part 26A of the UK Companies Act 2006, to secure approval from certain creditors before implementation.
“Today, Virgin Atlantic attended an English High Court hearing where the Restructuring Plan was formally sanctioned. A US procedural hearing will follow tomorrow, 3 September, ensuring the Restructuring Plan is recognised in the US, paving the way for completion of the £1.2bn private only, solvent recapitalisation of Virgin Atlantic.
“Achieving this significant milestone puts Virgin Atlantic in a position to rebuild its balance sheet, restore customer confidence and welcome passengers back to the skies, safely, as soon as they are ready to travel.”
The airline’s creditors voted in favor of the plan last week, but required the approval of the High Court to begin implementation. A further court hearing is scheduled for Thursday in the United States, in order for the plan to be recognized there. However, this is purely procedural and will not affect the outcome of today’s hearing.
Virgin Atlantic hopes to make this plan effective by Friday.
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Details of the recapitalization
Announced on July 14th, the airline’s restructuring plan is a five-year business plan that aims to allow the airline to successfully rebuild its balance sheet and return to a profitable operation. Valued at £1.2bn in total, it includes rescheduling aircraft deliveries, implementing cost-saving measures as well as cash injections.
On August 25th, the plan was presented to the airline’s creditors and received overwhelming support. 100% of its revolving credit creditors, aircraft lessors, and shareholders voted in favor, as well as 99% of its trade creditors.
Now, the airline is able to unlock the benefits of its plan, which includes inducting a new business partner Davidson Kempner Capital Management, who will be providing £170 million of secured financing. It will also receive £600 million of shareholder support, split between £200 million from Virgin Group and £400 million of shareholder deferrals and waivers.