Virgin Atlantic Files for Bankruptcy Protection in the U.S. -- Update
August 04 2020 - 9:03PM
Dow Jones News
By Andrew Scurria and Patrick Fitzgerald
Richard Branson's Virgin Atlantic Airways Ltd. filed for
bankruptcy in the U.S. to put into effect a $1.5 billion rescue
package designed to keep the airline solvent through the
coronavirus pandemic and aid the billionaire's broader efforts to
stabilize his travel and tourism businesses.
Virgin Atlantic sought protection under chapter 15 in U.S.
Bankruptcy Court in New York, as part of the airline's
court-sanctioned restructuring process in the U.K. that includes
GBP600 million ($784 million) in financial support from
shareholders.
Chapter 15 is the section of the U.S. bankruptcy code that gives
foreign companies access to many of the benefits of U.S. bankruptcy
law. Virgin's lawyers are seeking a temporary restraining order
from the U.S. court, which would freeze lawsuits and shield its
U.S.-based assets from potential seizure during restructurings in
their home countries.
Virgin's bankruptcy advisers said Tuesday the airline's debt
restructuring was prompted by unprecedented financial and operating
conditions facing the carrier because of the Covid-19 pandemic and
"the near shutdown of the global passenger aviation industry in
general."
Without a deal, Virgin couldn't ensure it could pay its bills
beyond mid-September, the airline's advisers said in court
papers.
The restructuring agreement will supply the airline with a
GBP200 million capital investment from Mr. Branson's Virgin Group
and GBP170 million in secured loans from U.S.-based Davidson
Kempner Capital Management LP.
Under the proposal, Virgin Group will retain its 51% controlling
stake in the airline, and U.S. partner Delta Air Lines Inc. will
continue to hold the remaining 49%. Both companies are deferring
fees on things like using Virgin's brand name and Delta's booking
system.
In court papers, Virgin Atlantic said the recapitalization is
essential to the company's ability "to reposition itself to not
only survive the exigent threats posed by the Covid-19 global
pandemic but to thrive once the immediate global health crisis
passes." For the restructuring to take effect, a U.S. court order
is required making the terms binding in the U.S., the airline
said.
Government restrictions put in place to combat infections and
passengers' fear of contagion have devastated passenger flight
volumes world-wide, forcing airlines from Europe to Latin America
and the U.S. to seek concessions from creditors and bailouts from
governments.
An English court Tuesday ordered Virgin to convene a meeting of
creditors Aug. 25. A hearing to consider approval of the airline's
restructuring plan is slated for Sept. 2 in London.
Write to Andrew Scurria at andrew.scurria@wsj.com and Patrick
Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
August 04, 2020 20:48 ET (00:48 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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