A solvent recapitalization of Virgin Atlantic

Virgin Atlantic has reached a major milestone towards securing its future today, by announcing plans for a private-only solvent recapitalization of the airline, following the severe impact of the Covid-19 pandemic on the global economy, the nation and the travel and aviation industry.

A Solvent Recapitalisation of Virgin Atlantic
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.
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, it paves the way for the airline to rebuild its balance sheet and return to profitability from 2022.
The recapitalisation will deliver a refinancing package worth c.£1.2bn over the next 18 months in addition to the self-help measures already taken, including cost savings of c.£280m per year and c.£880m rephasing and financing of aircraft deliveries over the next five years.
• Shareholders are providing c.£600m in support over the life of The Plan including a £200m investment from Virgin Group, and the deferral of c.£400m of shareholder deferrals and waivers
• Virgin Atlantic welcomes new partner Davidson Kempner Capital Management LP, a global institutional investment management firm which is providing £170m of secured financing
• Creditors will support the airline with over £450m of deferrals
• The airline continues to have the support of credit card acquirers (Merchant Service Providers) Lloyd’s Cardnet and First Data.
To secure approval from all relevant creditors before implementation, the Restructuring Plan will go through a court-sanctioned process under Part 26A of the Companies Act 2006 (the “Restructuring Plan”). With support already secured from the majority of stakeholders, it’s expected that the Restructuring Plan and recapitalisation will come into effect late Summer 2020.
Decisive action underpins the Restructuring Plan
Global aviation was one of the first industries impacted by the Covid-19 pandemic and will be one of the last to fully recover. From the start, the airline took decisive action to ensure its survival. In March, the Leadership Team took voluntary pay cuts and since April, more than 80% of the workforce has benefitted from the Government’s Coronavirus Job Retention Scheme, supporting efforts to preserve cash and minimise costs. In Q2, flying fell by 98% and in the second half of 2020, capacity is expected to reduce by at least 60% compared to 2019, with pre-crisis levels of flying unlikely to return until 2023. With the suspension of passenger flying in April, the airline delivered an unparalleled network of cargo-only flying, operating more than 1400 cargo flights in April, May and June.