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Virgin Atlantic saved (for now) as creditors approve financial refinancing

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Virgin Atlantic has officially been reprieved this afternoon after creditors voted to approve a £1.2 billion refinancing package.

In truth, there was very little on the line. Of the different creditor groups which had to approve the deal, the only group which had not already consented was a relatively small group of trade creditors. These were collectively owed just £50 million.

Virgin Atlantic had proposed to reduce the amount it would pay these creditors by 20% and reschedule the remaining payments.

Virgin Atlantic saved (for now) as creditors approve refinancing

To be honest, given that the airline is only saving £10 million, it seems a little odd that it decided to push through the request. It will not exactly bring it any goodwill from the creditors involved.

Given a choice of a 20% haircut or potentially losing all of the money they are due if the airline slipped into administration, the creditors voted in favour.

In a statement, the airline said:

“In order to complete the private-only, solvent recapitalisation of the airline, our Restructuring Plan is going through a court-sanctioned process under Part 26A of the UK Companies Act 2006.

“Today, Virgin Atlantic has reached a significant milestone in safeguarding its future, securing the overwhelming support of all four creditor classes, including 99% support from trade creditors who voted in favour of the Plan.  

“The next step is an English High Court hearing on 2 September to sanction the Restructuring Plan. We remain confident that the plan represents the best possible outcome for Virgin Atlantic and all its creditors and believe that the court will exercise its power to sanction the Restructuring Plan, at a hearing scheduled on 2 September. A US Chapter 15 procedural hearing will follow on 3 September, ensuring Virgin Atlantic’s Restructuring Plan is recognised in the US, paving the way for the £1.2bn private only, solvent recapitalisation of Virgin Atlantic.

“Achieving this milestone puts Virgin Atlantic in a position to rebuild its balance sheet, restore customer confidence and welcome passengers back to the skies as soon as they are ready to travel.”

Virgin Atlantic saved (for now) as creditors approve refinancing

Where is the new money coming from?

Despite the £1.2 billion headline figure being quoted, the deal involves surprisingly little new money. This is important, because you need real money – as opposed to write-offs or deferrals – to pay the bills.

Virgin is raising:

£30 million via a loan secured against an airline engine, which has been removed from the security package of an existing loan

£200 million via a loan (note this a loan, not equity) from Virgin Group

£170 million from hedge fund Davidson Kempner, in the form of a secured loan – although no-one is sure exactly what assets are left to secure a loan against

The remainder of the £1.2 billion comes from converting £400 million owed to Virgin Group and Delta Air Lines into preference shares and from waiving certain future payments.

Some existing loans and aircraft leases have also been restructured to reduce the short term cash drain on the business, although no money has been written off.

What next?

For now, Virgin Atlantic flies on.

With only £400 million of ‘real’ new money in the bank, however, we can only hope that long-haul flying – in particular transatlantic long-haul flying – recovers quickly.


HFP Virgin Atlantic Rewards credit card

How to earn Virgin Points from UK credit cards (November 2020)

As a reminder, there are various ways of earning Virgin Points from UK credit cards.  Many cards also have generous sign-up bonuses!

Click here to read our detailed summary of all UK credit cards which earn Virgin Points

As well as the two official Virgin Atlantic credit cards (see here, one has a bonus of 15,000 Points), you can also earn from various American Express cards – and these have sign-up bonuses too.

(Want to earn more Virgin Points?  Click here to see our recent articles on Virgin Atlantic and Flying Club and click here for our home page with the latest news on earning and spending other airline and hotel points.)

Comments (38)

  • jessiefan says:

    At some point countries will have to just suck it up. especially where their infection rates are higher than most everywhere else, ie USA. I think the Trump administration is more likely to open up borders with Europe than Democrats tbh, and if you look at excess deaths over seasonal norms it’s not catastrophic.
    As treatments improve along with mitigations then I think there’s a good chance USA will open up by October. You will never eradicate this strain of virus, just as you’ll never eradicate the flu.

    • blenz101 says:

      What I really can’t understand now that we have clearly established social distancing and substantial mitigation measures in place to control the spread why testing capacity isn’t being used to allow borders to reopen.

      I know the UAE is still off the list but to leave Dubai by way of example you need a negative covid PCR test taken 96 hours before you can even LEAVE DXB (at your own cost). This means the airport and planes should be relatively safe spaces as everyone has at least been very recently tested. The same test is required for all arriving passengers as well, reducing the risk hopefully of arriving passengers. Passengers from what the authorities consider high risk countries are tested again on arrival and have to quarantine until their test result is back (24-48 hours).

      I just can’t understand why the US can’t achieve something similar to so significantly reduce the risks of arrivals, and the EU/UK could demand the same all clear before anybody returning.

      The is also a further near instant blood prick test in use here in the UAE to travel into Abu Dhabi, it can’t detect CV19 but it does show if your body is fighting any infections via some kind of cell count magic. Fail the prick test and you have to obtain a full PCR.

      I know slight OT for Virgin but the point stands about looking for ways to make travel safer and ultimately help save business and employees on both sides of the atlantic.

      • BP says:

        Dubai by way of example is the reason I would not get on a flight there. I simply would not waste my money (or points) flying there not knowing what would happen.

        • Blenz101 says:

          Unless you were planning to visit a labor camp you would be far safer than the U.K.

      • Anna says:

        I agree about the US, they are so strict about immigration in general you’d think they would love a new level of bureaucracy to implement! Lovely extra questions on top of what plants you’re carrying and when was your last visit (do they send you back if you get that one wrong through nerves?!)

        • TomG says:

          Travelling in 2017, scatter brained and addled after spending a year providing full time care for my dad I gave the wrong dates for my previous trip. I can attest they don’t send you back but if you get an officer on a power trip they’ll pounce and do something to seem intimidating and make you squirm like slowly going through each stamp on your passport and asking why you went, where and who with before making a sarcastic comment about your sexuality when you say many of your trips were solo or with family. It’s frustrating, some of the nicest immigration officers I’ve encountered have been in the US but the most rude and ignorant ones have also been in the US. I’d settle for a nice bland medium.

    • Johnny Tabasco says:

      October 2021 I assume you mean.

  • marcw says:

    Postponing the inevitable. VS is going under, sadly.
    I don’t see long haul recovering – the additional cash VS is getting is peanuts. Importantly, they haven’t paid out refunds… Since march???

    • Rob says:

      Refunds are paid. I got mine (from April) in July as promised.

      • marcw says:

        350m still outstanding…

        • J says:

          A lot of people are still waiting for Lufthansa refunds too – it’s a separate issue.

          • insider says:

            Not really, if refunds still need to be paid, that means cash still needs to go out of the business

          • Kip says:

            Not all cancelled flights will result in refunds though. One of the advantages of leisure travel over business is that people will take this year’s holiday next year, particularly if there is no price increase. VS have ‘open tickets’ on the cancelled flights that can be redated to 2021 as long as the route is the same. Also, credit card companies are still holding sizeable sums of VS revenue so not every refund comes from Virgin’s pocket.

          • GM says:

            Shocked to actually see my Lufthansa refund (for a flight to Germany they kind of allowed me to cancel myself in late March) arrive back on July 6th. Maybe VS will also eventually turn up.
            I want them to succeed, I really do, but would prefer the cash right now while I await further developments.

  • Dev says:

    They made a deal with the devil … it will come home to roost!

    Genuine question, has there ever been a hedge fund involved with an airline that has not ended in further financial disasters or collapse of the airline?

  • Trevor says:

    I’ve ended up with 30k Miles in my VA account after [fortuitously] using 200k last year. I’m out, transferred into Hilton points. I do hope they survive but it does look a little wobbly…

  • Andy says:

    Can’t see how they’re going to last, 400m of new loans, and 800m of debt write off seems hardly likely to save them.

    Virgin Group lending money rather than taking more equity seems straight out of the PE playbook and a sure sign that they know that.

  • Peter North says:

    Stop your jibba jabba! I will be crowing about my flying club miles redemptions before or rather if Virgin disappear, crazy mans a fool for converting to Hilton Points!