Virgin Atlantic has shared today that it has reached a key milestone towards securing its future. The airline has confirmed that the US court is supporting its £1.2 billion ($1.57 billion) restructuring and refinancing plan.
Sorting out the finances
The British carrier is undergoing a solvent recapitalization in United Kingdom-based courts. However, it has also applied for Chapter 15 bankruptcy protection in New York to protect its assets in the United States.
A Virgin Atlantic spokesperson said that the US court is supporting the company’s restructuring plan by extending its order of August 4th until a hearing on September 3rd. This rescheduling ties in with English court proceedings.
“Virgin Atlantic attended UK court on Tuesday, as part of a solvent recapitalisation process under Part 26A of the UK Companies Act 2006. On the same day, proceedings in support of the solvent recapitalisation were also filed in the US under their Chapter 15 process,” the spokesperson told Simple Flying.
“These US proceedings were 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 UK Companies Act 2006.”
Responding to challenges
Virgin Atlantic said that with the securement of support from the majority of its creditors and stakeholders, the restructuring plan and solvent recapitalization should come into effect next month. Altogether, the company remains confident in the process.
The global health crisis has rocked the firm’s operations. Before the summer, most of its flights went through suspensions and several members of its fleet remain on the ground. Even though business is picking up again slowly, the majority of the damage has already been done. Therefore, the company has to find a way through the struggle.
The restructuring plan was announced on July 14th. Virgin emphasizes that these court hearings are procedural and that it is not going through a Chapter 11 bankruptcy filing. Altogether, it is going through a filing that supports the solvent recapitalization of the carrier.
Virgin states that the restructuring plan is based on a five-year business plan. It also has the support of both the Virgin Group and Delta, along with private investors and existing creditors. Altogether, the stakeholders hope that the plan paves the way for the airline to rebuild its balance sheet and return to profitability from 2022.
It’s not a surprise that Virgin Atlantic has to go through a restructuring process like this. Several airlines aren’t expecting to make a profit over the next few years. If this plan can help the operator return to profitability in just two years, then it sounds like a helpful move.
What are your thoughts about Virgin Atlantic’s plan? How do you see the situation progressing? Let us know what you think in the comment section.