Virgin Atlantic creditors back crunch £1.2bn bailout deal
An overwhelming majority of Virgin Atlantic’s creditors have this afternoon approved the embattled airline’s £1.2bn bailout package, a critical step in ensuring the carrier’s survival.
In a statement, the carrier said that all four of its creditor classes had voted in favour of the proposal.
The vote marks a huge step forward in Virgin’s bid to remain flying after six months of turbulence caused by the coronavirus pandemic.
As a result of the disease, the Sir Richard Branson-founded carrier was forced to suspend all of its flights for several months, and has said it will cut 3,500 of its 10,000 staff.
It had warned that if the proposal had been rejected, it would run out of cash by the end of September.
Under the proposal approved today, it will have sufficient funding to survive the next 18 months.
A spokesperson for the airline said: “In order to complete the private-only, solvent recapitalisation of the airline, our restructuring plan is going through a court-sanctioned process under Part 26A of the UK Companies Act 2006.”
“Today, Virgin Atlantic has reached a significant milestone in safeguarding its future, securing the overwhelming support of all four creditor classes, including 99 per cent support from trade creditors who voted in favour of the plan.
Pilots union Balpa welcomed the deal, saying it would help protect 6,500 jobs.
However, general secretary Brian Strutton said the government needed to begin providing support for the UK’s airlines.
“It’s a shame the UK government wouldn’t help Virgin and frankly, unless the government starts supporting the aviation industry soon, there will be more job losses and in airlines and regional airports.”
The airline will now go to the High Court on 2 September to get a court sanction for the deal.
Finally, a US Chapter 15 procedural hearing will follow on 3 September, ensuring the plan is recognised in the US.
Virgin Atlantic agreed the private-only deal back in July, but needed 75 per cent of its creditors to back the rescue package.
Over 200 creditors, each owed at least £50,000 by the airline, voted on the deal, which will see Virgin receive £600m from shareholders.
Parent company Virgin, which owns 51 per cent of the airline, will contribute £200m.
Investment firm Davidson Kempner Capital Management will also provide £170m in financing.
Under a new form of recapitalisation, judges would have been able to overrule creditors if they had voted against the proposal.
Back in April, it was reported that the government had ruled out a £500m rescue deal for the carrier on the grounds that it had not exhausted all the ways it could have raised the money privately.
At the time, chancellor Rishi Sunak said that money would be made available for struggling airlines only as a “last resort”.