Airline company Virgin Atlantic Airways on Tuesday filed for Chapter 15 bankruptcy protection in New York. This is done to allow foreign debtor to protect their assets in the US while they are in the process of restructuring on their homeland. Last month, the company had also announced to secure a 1.2 billion euro ($1.5 billion) rescue package as the UK-based carrier tries to navigate the pandemic’s blow to the aviation sector.
A Virgin Atlantic spokesperson stated: “The process we have asked to be recognized is a solvent restructuring of an English company,” referring to the Chapter 15 filing in the US.
Earlier of the same day as filing, a hearing from the London court granted the company for creditors to meet on August 25 to vote on the restructuring plan. The company has said it will be running out of funds if a rescue deal is not set to motion. Representative for the company also said that majority of the stakeholders have supported restructuring and recapitalization which will “come into effect in September. We remain confident in the plan.”
You may have read reports about a filing that has been made under the U.S. Chapter 15 process, in support of our solvent recapitalisation plan. Let us explain what it means for you. pic.twitter.com/xN1FxV8XkK
— virginatlantic (@VirginAtlantic) August 5, 2020
Lawyers of the Richard Branson-owned company said that Virgin Atlantic is, technically, “fundamentally sound.” It will still operate even as restructure strategies are pursued. However, its overhaul strategy will still depend on the approval of its US Chapter 15 filing.
The filing reads: “Because [Virgin Atlantic Airlines] has material assets and operations in the United States, the recognition of the English proceeding and enforcement of the sanction order and the plan through Chapter 15… are necessary to ensure that the plan is effective and binding.”
On April, news broke that the company was on the verge of collapse and sought government for help. Even its multibillionaire owner had his private island as collateral to save the suffering carrier amid the pandemic killing demand for air travel. It had also removed 3,550 employees.
Meanwhile, its sister company Virgin Australia has also filed for Chapter 15 in the US and voluntary administration in Australia. It found new ownership from US private equity firm Bain Capital. Like its London counterpart, Virgin Australia is also undergoing restructuring which included axing 3,000 jobs and reducing airline fleet.
An airline org had also previously estimated that aviation’s full recovery is only until 2024.