Virgin Atlantic (VS, London Heathrow) is seeking a take-it-or-leave-it deal with lessors wherein they would either accept significant deferrals and reductions in lease rates or repossess their aircraft, court documents related to the carrier's US Chapter 15 proceedings have revealed.
The airline, which filed for the US Chapter 15 bankruptcy protection solely as a procedural step in tandem with its ongoing "solvent recapitalisation" proceedings in the UK, said it had obtained approval from the High Court of England and Wales to convene meetings with four main groups of creditors on August 25. The airline, which has not entered into administration in any of the countries, has until September 3 to obtain the creditors' approval for its plan.
According to the court documents, the airline proposed three alternatives to lessors:
- agree to a deferral of a portion of each lease with deferred amounts to be repaid in installments over four years starting in January 2021;
- accept a permanent reduction in lease rates combined with a deferral of all dues which would then be repaid in full at the end of each lease's contract;
- accept immediate return of the leased aircraft.
The ch-aviation fleets ownership module shows Virgin leases the majority of its aircraft: all four A330-200s (including two operated by Virgin Atlantic International, all nine A330-300s (including two at Virgin Atlantic International), all five A350-1000s, and four out of seventeen B787-9s. The carrier said that its current operating leases expire between March 2021 and January 2034, and its aggregate future liabilities exceed USD1.25 billion.
The plan also proposes to convert the carrier's USD280 million fully-drawn revolving credit facility into a term loan facility, at a higher interest rate (by one percentage point) but with a longer maturity date.
Another group of creditors, 166 so-called trade plan creditors (essentially suppliers of a variety of services and goods), has been asked to accept a 20% haircut on all debt accumulated before July 14, 2020. 10% of the post-haircut debt would be paid upon the entry into effect of the recapitalisation plan with the remainder due in quarterly installments from December 2020 through September 2022.
Finally, connected creditors, including 49%-owner Delta Air Lines (DL, Atlanta Hartsfield Jackson), will be asked to accept new shares as part of a debt/equity conversion.
Virgin Atlantic said it would ask all trade plan creditors to waive all defaults, with "certain" of those called by lessors, the banks involved in the revolving credit facility, and connected shareholders also due to be waived.
The carrier underlined that creditor's consent to the plan, which has been tentatively signalled, is crucial for its survival.
"Absent the Plan, there is significant uncertainty as to whether [Virgin Atlantic] would be able to achieve the requisite level of creditor consent to implement the Recapitalization, or any alternative transaction, in time to prevent it from going into formal insolvency proceedings given its deteriorating liquidity position," it said in the filing.
To obtain court approval for the plan, the consent of 75% of creditors, holding at least 75% of the airline's total debt, is required.
