UK’s Virgin Atlantic secures US recognition for restructuring

Bloomberg

Virgin Atlantic Airways Ltd was granted US bankruptcy protection as the carrier controlled by Richard Branson pursues a 1.2 billion-pound ($1.6 billion) rescue plan in the UK.
The provisional ruling by US Bankruptcy Judge Michael E Wiles in Manhattan protects the airline’s American assets and ensures that the debt reorganisation will be overseen under the British legal process.
After the company takes its next major restructuring step in the UK, the company will return to Wiles to ask him to make the protections permanent at a hearing scheduled for early September.
That next step will be a meeting of creditors scheduled on August 25 as part of the British process, under which any holdouts can be forced to accept the restructuring even if some classes vote against it.
Virgin Atlantic says that only one of four creditor groups, comprising trade suppliers, hasn’t backed the plan yet.
The rescue will bring in new money from Branson and US hedge fund Davidson Kempner Capital Management, while requiring a restructuring of existing debt.
During the court hearing, which was held by telephone, Wiles said once final wording changes are made to the document, he will sign an order implementing the protections under Chapter 15 of the US bankruptcy code.
Virgin Atlantic told a London court that available cash will fall below 75 million pounds without the plan’s approval, allowing bondholders to enforce the sale of London Heathrow airport slots and compelling it to fold.
The Crawley, England-based carrier has been hit particularly hard by the Covid-19 pandemic, with the lucrative North Atlantic market on which it depends still largely wiped out as the virus continues to rage in the US.