Following weeks of speculation from media and industry sources, Virgin Atlantic has confirmed that it has closed a £1.2 billion rescue deal.
On Tuesday, the beleaguered British carrier announced that it had settled on a privately-funded recapitalisation package – one that largely mirrors leaked reports.
New York-based hedge fund Davidson Kempner (DK) will provide about £170 million in loans, in return receiving collateral but no shares in the company.
Early reports that tipped the ownership structure to stay intact through the deal have also been proved correct, with 49 per cent retained by Delta Air Lines (and the rest claimed by the Virgin flagship group).
The breakdown:
- £170 million of funding from DK;
- £200 million from Branson;
- £400 million in commercial deferments from Virgin Group and Delta; and
- £450 million from undeclared creditors and suppliers.
While CEO Shai Weiss reportedly struggled to secure backing from payment processor First Data over the weekend, the recapitalisation announcement states that the airline “continues to have the support” of this company and others. As part of a push to free up capital in the near-to-mid future, Weiss has requested a dip in cash collateral requirements from these companies.
As part of the restructuring, Weiss will also outline the new shape of the business and his strategy to return it to profit by 2022.
“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect,” he said.
“Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards we set ourselves, but we will do everything in our power to earn back their trust.”
The solvent recapitalisation comes without assistance from the UK government, after a request for state funding made out in late March/early April was knocked back. Despite the snub, rival firms with larger asset pools – including British Airways and easyJet – would go on to secure hundreds of millions of pounds from Westminster.
