Virgin Atlantic set for $1.25b rescue in victory for Branson

Bloomberg

Virgin Atlantic Airways Ltd announced a 1.2 billion-pound ($1.5 billion) rescue in a major victory for Richard Branson, who snatched his UK airline from the brink of failure under the weight of the coronavirus crisis.
US hedge fund Davidson Kempner Capital Management will provide about 170 million pounds in secured financing,
according to a statement, while Branson will contribute 200 million pounds after raising money from space venture Virgin Galactic Holdings Inc.
The plan also relies on creditor deferrals, with Virgin Atlantic planning to use a court-sanctioned process to overcome any dissenting minorities.
Branson and his team, led by Chief Executive Officer Shai Weiss, secured the private bailout after Britain refused to contribute taxpayer funds when the carrier was grounded by the pandemic. After months of uncertainty, the mogul, who turns 70 this week, is set to retain control of a business he founded in 1984, though future prospects will hinge on the return of US travel.
“This doesn’t mean that we are out of the woods 100%. But it shows that people believe in the future of Virgin Atlantic and our business plan,” Weiss said in an interview. He predicted that the carrier will return to profit in 2022 as traffic gradually recovers to 2019 levels.
The loan from Davidson Kempner will be secured against planes and aircraft slots, Weiss said. The New York firm, which has about $30 billion of assets under management, won the deal after offering more favourable terms than other potential backers, people familiar with the matter said on July 10.
An alliance of Elliott Management Corp and UK investment firm Greybull Capital declined to match it, while Centerbridge Partners stepped back after coming late to the process, the people said.
The plan includes 450 million pounds of creditor deferrals, and 400 million pounds of payment delays or waivers from Branson’s Virgin Group and co-owner Delta Air Lines Inc.
Delta’s contribution to the rescue involved “deferral of brand fees, as well as certain other joint venture fees we would typically earn,” Chief Executive Officer Ed Bastian said on a conference call on Tuesday. He declined to provide additional details.
Branson’s abode in British Virgin Islands — where residents pay no income or capital-gains taxes — made a state bailout politically difficult. The UK government earlier rejected his plea for a loan guarantee for Crawley, England-based Virgin Atlantic on the grounds that its credit rating was too low.