Move comes as airline warns it could run out of money by September 28
Gatwick-based carrier Virgin Atlantic has filed for bankruptcy protection in a United States court as it tries to survive the COVID-19 pandemic – but it doesn’t mean it’s the end of the road for the carrier.
Following a court appearance in the UK on Tuesday (August 8), the airline made the Chapter 15 filing in a New York federal bankruptcy court later that day.
As part of its restructuring plan announced on July 14, the company is seeking to progress a private-only solvent recapitalisation of the airline – which involves a refinancing package worth £1.2bn over the next 18 months.
A Virgin Atlantic spokesperson told Key.Aero that to progress, “the restructuring plan is going through a court-sanctioned process under Part 26A of the Companies Act 2006, to secure approval from all relevant creditors before implementation.”
The spokesperson added: “Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalisation 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 recognise foreign restructuring processes.”
Essentially, the Chapter 15 process allows a foreign debtor – in this case, UK-based Virgin Atlantic – to shield its assets from creditors while it undergoes a restructuring process.
This type of bankruptcy protection is used for foreign cases in the US and supports primary proceedings in another country, typically the debtor’s home state.
Virgin’s restructuring plan is based upon a five-year strategy, which it says will lead it to return to profitability from 2022 onwards.
Affected creditors are due to vote on the restructuring plan on August 25. If it fails to win approval, the company told the UK court that it would “run out of money altogether” by the week beginning September 28.