Virgin Atlantic Airways (VA) announced on 14 July 2020 that it has launched the first restructuring plan under the new Part 26A of the Companies Act 2006 in the UK (the "Restructuring Plan"). The Restructuring Plan process, which was introduced by the recently enacted Corporate Insolvency and Governance Act 2020, entered into force on 24 June 2020.
Virgin Atlantic explains in its announcement that it proposes to use the Restructuring Plan to implement a solvent recapitalisation, which it expects to raise c. £1.2bn. The recapitalisation has been proposed following the airline's recent COVID-19 related financial difficulties.
VA announced that the key high-level features of its proposed recapitalisation are as follows:
- Virgin's shareholders (Virgin Group and Delta Airlines) would provide c. £600m of support through a combination of equity injection and deferrals.
- A new money provider will be providing £170m of secured funding.
- Support from other creditors is to include over £450m of deferrals and amended terms.
- Support has also been secured from Virgin's credit card acquirers to unlock customer cash.
VA has announced that it expects its Restructuring Plan, which would first need to be sanctioned by the court, to take effect in late summer 2020.
Comment
An important and as yet untested feature of the UK's new Restructuring Plan process is the possibility of 'cross-class cram-down' i.e. the ability to bind whole dissenting classes of creditors. Whether or not VA's Restructuring Plan will involve the use of a 'cross-class cram down' will only become clear after creditors vote on the proposals.
The UK's new Restructuring Plan was also widely expected to more easily allow arrangements to be reached with operational creditors (e.g. credit card acquirers) as part of the same process with financial creditors. Further analysis on the UK's Restructuring Plan process can be found here.
The progress of VA's Restructuring Plan through the voting process, and through the court process in two hearings this summer, will therefore be closely watched in the UK and elsewhere.
