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Virgin Atlantic staves off administration with £1.2bn funding deal

After putting advisers on standby for a potential administration, Virgin Atlantic has now secured a solvent recapitalisation, which will deliver a refinancing package worth over £1.2bn during the next 18 months.

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While Alvarez & Marsal had been put on standby to explore contingency options for a rescue including administration, this new funding deal will instead involve shareholders providing around £600m in support, including a £200m investment from Virgin Group and the deferral of £400m of shareholder deferrals and waivers.

 

Global investment management firm Davidson Kempner Capital Management will be providing £170m of secured financing.

 

Creditors will support the airline with over £450m of deferrals, and the airline continues to be supported by credit card acquirers (Merchant Service Provides) Lloyds’s Cadnet and First Data.

 

The restructuring and recapitulation plan is anticipated to come into effect in late summer 2020, once it has gone through a court-sanctioned process under Part 26A of the Companies Act 2006.

 

Houlihan Lokey has been providing advisory services for the private investment in recent months, as the airline explored options for additional funding.

 

As a result of the pandemic on aviation, in May, Virgin Atlantic reduced the number of employees by 3,550 across all functions.

 

Virgin Atlantic estimates that pre-crisis levels of flying will be unlikely to return until 2023.

 

Shai Weiss, chief executive of Virgin Atlantic, said: “The last six months have been the toughest we have faced in our 36-year history. We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline.”

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