Virgin Atlantic creditors to vote on £1.2bn Covid rescue deal
Virgin Atlantic’s creditors will vote on a £1.2bn rescue deal on Tuesday, as the airline tries to secure its future following the coronavirus crisis.
The airline revealed the privately-funded recapitalisation plan agreed with its shareholders and investors in July, after Virgin’s attempts to win UK state support were unsuccessful, and is designed to help it survive another 18 months of travel turmoil, with a return to profit in 2022.
The carrier, founded by Sir Richard Branson, has previously said it will run out of money and could collapse into administration if creditors do not back the deal.
Almost 200 of the airline’s affected trade creditors, each of whom is owed more than £50,000, will vote on Tuesday at a hearing at the high court in London. Virgin Atlantic needs to gain support equivalent to 75% of the overall outstanding value of money owed.
If Virgin is successful, a further UK court hearing will take place on 2 September to approve the plan, and there will be a procedural hearing in the United States on 3 September. If the creditors do not sign off on the deal, the judge is still able to rule that it should go ahead.
Virgin Atlantic, which is 51%-owned by Branson’s Virgin Group and 49% by the US airline Delta, is confident that creditors will support the rescue plan.
Virgin, which only flies long-haul international routes, has taken drastic action to conserve cash after its planes were grounded for four months.
The airline disclosed plans to close its base at London’s Gatwick airport, and has cut more than 3,500 jobs, as it grappled with the fallout from Covid-19. The company has also cut down its fleet, including retiring some of its Boeing 747 jumbo jets, and has pushed back orders for new planes.
Virgin’s request for state funding from the UK government earlier in the coronavirus crisis was rebuffed, even though its competitors such as British Airways and easyJet obtained loans worth hundreds of millions of pounds from the Bank of England to help tide them over.
Branson is injecting £200m of his own money as part of the rescue, which was raised through selling off a stake in the space division Virgin Galactic.
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