LONDON – It has emerged that Virgin Atlantic (VS) has filed for Chapter 15 Bankruptcy in the United States of America.
It is keen to note that this does not mean bankruptcy in the United Kingdom, where the airline is based.
Chapter 15 has taken place in the State of New York, which is where a lot of VS’ operations are, featuring New York JFK and Newark.
The news comes as the airline told judges in court requesting approval of the £1.2 billion rescue package formed last month.
According to Bloomberg, without such funds, available cash will drop to about £49m by next month.
This is below the £75m required in bondholder contracts to remain afloat.
It ultimately turns out that the sale of Heathrow Airport (LHR) slots against the bonds in question would cause the airline to fold.
The airline will vote on the restructuring process on August 25.
Three of the creditors will agree to back it in advance, with parties still due to decide.
A spokesperson for Virgin Atlantic gave confidence over this deal.
“With support already secured from the majority of stakeholders, it’s expected that the restructuring plan and recapitalization will come into effect in September”.
Restructuring by September 2 is the magic date of which the airline needs to meet all the criteria.
What is a Chapter 15?
A Chapter 15 Bankruptcy is a bit different from the normal Chapter 11’s that you see in the U.S.
This element of bankruptcy relates to foreign companies such as VS who have US assets looking to reorganize.
It is a secondary bankruptcy filing which does not represent an overall collapse.
UPDATE: August 5 – Virgin Atlantic has released a statement regarding the Chapter 15 proceedings via Twitter.
It says: “Following our return to the skies, we’re currently operating our flying schedule from our London Heathrow base, and these flights continue as normal”.
“All upcoming flight and holiday bookings remain valid; Flying Club members can continue to earn and redeem their miles as usual; customers with cancellations can continue to rebook or request refunds and these are being processed; and our people are ready to ensure you Fly Safe and Fly Well”.
“As announced on 14 July, we have taken a big step forward in securing our future, by launching a court backed process as part of a solvent recapitalisation of the airline and holiday business. The approval process is in motion and we expect the recapitalisation to come into effect in September”.
“The Chapter 15 filing in the United States is a procedural application to allow the US courts to recognise the restructuring process we are undertaking – in this case, the solvent recapitalisation of the airline under English law”.
“Once approved and implemented, our plan will keep Virgin Atlantic flying”.
The airline’s Chief Commercial Officer Juha Jarvinen was also keen to note on Twitter about the restart in services to Los Angeles, New York, Barbados, Hong Kong and Shanghai.
This is a developing story!