The ups and downs of the financially troubled Virgin Atlantic have been so much like a rollercoaster in recent days it has been hard to keep up with, the recuse deal was on then off and then on again. So, here's the latest...... at least for now!
Tuesday 14th July, Virgin Atlantic announces basic details of a plan to 'solvently recapitalise' the airline'. The press release said the recapitalisation would deliver a refinancing package worth c.£1.2bn over the next 18 months in addition to measures already taken.
The plan would have seen The Virgin Group investing £200 million, deferral of £400 million shareholders deferrals and waivers. Davidson Kempner Capital Management LP investing £170m and creditors supporting the firm with £450 million of deferrals. The press release at the time indicated this was going to be done through a court-sanctioned process under Part 26A of the Companies Act 2006, paving the way for this weeks action.
Tuesday 4th August, Virgin Atlantic has filed for bankruptcy in the UK, a position designed to allow creditors to vote on the much talked about financial restructuring proposals later this month. The company telling the court that it only had enough cash to last until 28th of next month without the restructuring deal going through.
Virgin Atlantic also files for Chapter 15 bankruptcy protection in New York, which non-U.S. companies have to do in order to protect its assets while it goes through a potential restructuring.
A Virgin Atlantic spokesperson said: "In order to progress the private-only solvent recapitalisation of the airline, 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. With support already secured from the majority of stakeholders, it’s expected that the restructuring plan and recapitalisation will come into effect in September. We remain confident in the plan."
The meeting of creditors will take place with the vote occurring on August 25th.
So, yes, while Virgin Atlantic is technically bankrupt, it is only a temporary measure in order to allow its creditors to vote on the restructuring plan. The carrier will continue to operate as normal while this action goes on and the future of the company, well that really depends on the creditors meeting and what they decide to do. It is a fair assumption that they all will vote for the deal to go ahead, at least that way, they have some chance of getting the bulk of the money they are owed back - albeit over a much longer period than was envisaged. Some see it as rather telling that Delta, the U.S. carrier which currently owns 49% of Virgin is not a key player in the restructuring deal, it has refused to invest more on the troubled carrier, just deferring some of the money it is due.
What does this mean for passengers? Our chief aviation editor Jason Shaw explains: "There isn't a great deal of difference for passengers, the airline is still going to operate as normal. Flights are still going on schedule, the frequent flyer programme - The Flying Club continues with passengers being able to either, spend, earn or transfer miles as normal. Nothing in the latest announcements, which the mainstream media paint as catastrophic, should give a great cause for concern."
"The airline is still ploughing through refunds for cancelled flights, at a rather glacial pace it seems, and this will continue throughout the whole process going on at the courts and at the meetings."
"As for the future, the Virgin brand, whilst slightly tarnished is still strong and still popular with a lot of the travelling public. The airline's service and staff are still its best assets, so I see no reason why it shouldn't survive the current turmoil, that is providing, of course, the creditors see a long term future for a return if the plan goes ahead. If I needed to, I'd still book a future flight with Virgin Atlantic, but if I was asked if I would either take a credit voucher or a full cash refund for a cancelled flight - I'd opt for the latter."
Recommended for you...
