Virgin Atlantic Files Bankruptcy Protection In The United States
Many airlines including Virgin Atlantic have been hit hard by the COVID-19 pandemic, which has dramatically reduced travel demand. A few months back we saw Virgin Atlantic firing a third of its employees. Now, the carrier has filed for protection under Chapter 15 of the US bankruptcy code to shield its assets in the United States.
Virgin Atlantic Restructuring Plan
Virgin Atlantic has secured a £1.2bn refinancing package over the next 18 months. According to the press release, the restructuring plan is based on a five-year business plan, and with the support of shareholders Virgin Group and Delta, new private investors and existing creditors the airline will rebuild and return to profitability in 2022. To secure approval from all relevant creditors before implementation, the restructuring plan will go through a court-sanctioned process under the UK Companies Act.
From the official press release:
Virgin Atlantic has taken a big step forward in securing its future, by launching a court backed process as part of a solvent recapitalization of the airline and holiday business, with a Restructuring Plan that once approved and implemented, will keep Virgin Atlantic flying.
In order to get some breathing room, they filed for protection under Chapter 15 of the US bankruptcy code.
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Virgin Atlantic Files Bankruptcy Protection In The United States
Virgin Atlantic has filed for protection under Chapter 15 of the US bankruptcy code to shield its assets in the United States while they work to finalize a rescue plan in the UK. Chapter 15 allows foreign companies with US assets to protect themselves against claims, while they work on a rescue plan at home.
A spokesperson for Virgin Atlantic said:
Following the UK hearing held yesterday (4th August), ancillary proceedings in support of the solvent recapitalization were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognize foreign restructuring processes. In the case of Virgin Atlantic, the process we have asked to be recognized is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006.
Virgin Atlantic was forced to cut more than 3,000 jobs because of the financial struggles. This number represents a third of the workforce. The carrier also announced in a press release the end of operations at Gatwick Airport back in May. Richard Branson said that they will focus on operating from the London Heathrow base and Manchester. All routes from Gatwick, which were serving among others Orlando, Florida, and Barbados, were moved to Heathrow.