Virgin Atlantic has announced plans for a private-only solvent recapitalisation of the airline.

The carrier says it has launched 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 has the support of shareholders Virgin Group and Delta, new private investors and existing creditors, and is based on a five-year business plan, paving the way for the airline to rebuild its balance sheet and return to profitability from 2022.

The refinancing package delivered by the recapitalisation will be worth c.£1.2 billion over the next 18 months, in addition to the self-help measures already taken which include cost savings of c.£280 million per year and c.£880 million rephasing and financing of aircraft deliveries over the next five years.

New partner

Shareholders are providing c.£600 million in support over the life of the plan which includes £200 million investment from Virgin Group and the deferral of c.£400 million of shareholder deferrals and waivers.

Virgin Atlantic’s new partner Davidson Kempner Capital Management LP is providing £170 million of secured financing and creditors will support the airline with over £450 million of deferrals.

The carrier says it continues to have the support of credit card acquirers (merchant service providers) Lloyd’s Cardnet and First Data.

To secure approval from all relevant creditors before implementation, the restructuring plan will go through a court-sanctioned process under Part 26A of the Companies Act 2006 (the “Restructuring Plan”). 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.

Virgin Atlantic has taken decisive action since the beginning of the pandemic to ensure its survival, including voluntary leadership team pay cuts, taking part in the UK Government Coronavirus Job Retention Scheme and operating more than 1400 cargo-only flights in April, May and June.

The airline also took the difficult decision to reduce the number of people it employs by 3,550 across all functions and has consolidated leisure flying at London Heathrow and Manchester.

The carrier says it will restart passenger flying on 20 July, prioritising the health, safety and security of its people and customers throughout their journeys.