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Virgin Atlantic secures £1.2b rescue
[LONDON] Virgin Atlantic Airways secured a £1.2 billion (S$2.09 billion) rescue in a major victory for Richard Branson, who snatched his UK airline from the the threat of failure under the weight of the coronavirus crisis.
US hedge fund Davidson Kempner Capital Management will provide about £170 million in secured financing, while Mr Branson, its billionaire founder, will contribute £200 million after raising money from his Virgin Galactic Holdings space venture.
The trans-Atlantic carrier will also get relief on some £400 million of payment deferrals and waivers granted by owners Delta Air Lines and Branson's Virgin Group, according to a statement Tuesday.
The plan includes an added £450 million of creditor deferrals. Virgin Atlantic said it will use a court-sanctioned process to secure approval from all creditors for the restructuring plan.
Mr Branson and his team, led by Chief Executive Officer Shai Weiss, managed to secure a private bailout after the UK government refused to contribute taxpayer funds when Virgin Atlantic was grounded by the coronavirus crisis. After months of uncertainty the mogul, who turns 70 this week, is set to retain control of an airline he founded in 1984. Still, its future prospects are cloudy, hinging on the return of US travel.
New York-based Davidson Kempner, which has about US$30 billion of assets under management, won the deal after offering more favourable terms than other potential backers, people familiar with the matter said on July 10. An alliance of Elliott Management and UK investment firm Greybull Capital declined to match it, while Centerbridge Partners stepped back after coming late to the process, the people said then.
Mr Branson's abode in British Virgin Islands where residents pay no income or capital-gains taxes made a taxpayer bailout politically controversial. The UK government earlier rejected his plea for a loan guarantee for Crawley, England-based Virgin Atlantic, on the grounds that its credit rating was too low.
The snub launched weeks of frenzied talks to save the stricken airline. Mr Weiss pitched his recovery strategy to a dozen potential supporters in a virtual presentation in May.
That led to interest from several parties, while Mr Branson raised more than US$400 million to help his companies by selling shares of Virgin Galactic.
One of the thorniest issues involved freeing up credit-card payments withheld by settlement firms in case Virgin Atlantic went bust. That matter was resolved in the last few days, people familiar with the matter said.
Aircraft leasing firms have largely gone along with the proposals. Virgin Atlantic will launch a restructuring process in the UK to make its plan binding on all creditors if it gets support from 75 per cent of them.
In an interview, Mr Weiss said backing is "there or thereabouts" for each class of creditors, and he was confident of clearing the hurdle.
Virgin Atlantic said that along with the recapitalization, it's taken measures including £880 million of aircraft-delivery deferrals and financing. Cost cuts, including the closure of its Gatwick based, will save £280 million each year.
Delta, which owns 49 per cent of Virgin Atlantic, had said it wouldn't put in more cash. However, the US airline will make a significant contribution by delaying outstanding marketing fees and other dues.