Virgin Atlantic (VS, London Heathrow) secured its creditors' backing in a vote on August 25 in favour of a GBP1.2 billion pound (USD1.6 billion) rescue plan that will secure its future for at least 18 months and, for now, save 6,500 jobs.
The vote garnered “99% support from trade creditors who voted in favour of the plan,” a spokeswoman said, and brings the airline a step closer to completing a restructuring designed to keep it operating beyond the coronavirus crisis.
In the ballot, the smaller suppliers the transatlantic specialist owed money to approved the plan, which means that all four creditor classes - shareholders, banks, lessors, and suppliers - have now approved it.
The creditors agreed in the vote to waive 20% of what they are owed, with the rest paid back in instalments, the BBC reported.
“Achieving this milestone puts Virgin Atlantic in a position to rebuild its balance sheet, restore customer confidence, and welcome passengers back to the skies as soon as they are ready to travel,” the spokeswoman assured.
Virgin Atlantic had warned that without the deal it would run out of cash by September. A hearing at the High Court of Justice in London is now scheduled for September 2 to approve the plan, followed by a Chapter 15 procedural hearing in the United States the following day so the deal can be recognised there.
The deal involves GBP400 million (USD526 million) in fresh capital, half of it coming from its 51% shareholder, Richard Branson's Virgin Group, and about GBP170 million (USD224 million) from New York-based alternative investment management firm Davidson Kempner.
Delta Air Lines (DL, Atlanta Hartsfield Jackson), which owns the remaining 49%, said it was “optimistic that this plan will allow Virgin Atlantic to secure its future” and added that it remains “firmly supportive” of the company.
As previously reported, Virgin Atlantic has already cut more than 3,500 jobs and closed its base at London Gatwick.
“It’s critical that they get this money to survive the crisis,” John Strickland, owner and director of London-based airline advisor JLS Consulting, told Bloomberg. “The challenge now is the weakness of Virgin’s core market. It’s important that they guard cash, manage every cost, and work to further strengthen their liquidity.”
