All four classes of creditors of Virgin Atlantic have voted in favor of a restructuring plan that, if approved by the English High Court, will result in a £1.2 billion ($1.57 billion) private recapitalization of the airline and save it from collapse.
Announced on July 14, the restructuring hinges on a new five-year business plan endorsed by Virgin Group and 49-percent shareholder Delta Air Lines, along with new private investors and the existing creditors. The four classes of creditors consist of those under the company’s revolving credit facility, aircraft lessors, shareholders, and trade creditors.
“Today, Virgin Atlantic has reached a significant milestone in safeguarding its future, securing the overwhelming support of all four creditor classes, including 99 percent support from trade creditors who voted in favor of the plan,” a Virgin Atlantic spokesperson said in a written statement. “We remain confident that the plan represents the best possible outcome for Virgin Atlantic and all its creditors and believe that the court will exercise its power to sanction the restructuring plan at a hearing scheduled on 2 September. A U.S. Chapter 15 procedural hearing will follow on 3 September, ensuring Virgin Atlantic’s restructuring plan is recognized in the U.S., paving the way for [the] recapitalization of Virgin Atlantic.”
The airline said the recapitalization will center on a refinancing package worth £1.2 billion over the next 18 months and “self-help” measures already taken, including cost savings of £280 million per year and an £880 million re-phasing and financing of aircraft deliveries over the next five years.
Shareholders have committed to providing £600 million of support over the life of the plan, including a £200 million investment from Virgin Group and the £400 million worth of shareholder deferrals and waivers. Meanwhile, new partner Davidson Kempner Capital Management, a global institutional investment management firm, has committed to £170 million of secured financing.
The U.S. proceeding on September 3 is a standard procedural step available to Virgin Atlantic to protect its assets in that jurisdiction while the company completes its solvent recapitalization via the UK court process and enacts the plan.