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Virgin Atlantic has announced a restructuring and recapitalisation plan with creditors and private investors worth ~£1.2 billion:

“Virgin Atlantic has taken a big step forward in securing its future, by launching a court backed process as part of a solvent recapitalisation 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.”

The deal is structured as follows:

• 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.

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.

Shai Weiss, CEO, Virgin Atlantic commented:

“Few could have predicted the scale of the Covid-19 crisis we have witnessed and undoubtedly, the last six months have been the toughest we have faced in our 36-year history. We have taken painful measures, but we have accomplished what many thought impossible. The solvent recapitalisation of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond. We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline, with a healthy balance sheet.

“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect. Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards we set ourselves, but we will do everything in our power to earn back their trust.

“While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, I know that now, more than ever before, our people are what sets us apart. I have been humbled by their support and unwavering solidarity throughout. The pursuit of our vision continues and that is down to each one of them.”

Conclusion

Final agreement of the deal still has to be approved legally, so there are still some hoops to jump through, but on the face of it this looks like great news for Virgin Atlantic.

The airline also claims that “By 2022 Virgin Atlantic will fly the same number of sectors as 2019 despite its smaller scale”, which seems rather optimistic, but I certainly wish them luck!