Virgin Atlantic has filed for Chapter 15 bankruptcy as the pandemic continues to impair the industry.
The filing in the U.S. bankruptcy court said the company has negotiated a deal with stakeholders ‘for a consensual recapitalization’ to get debts off the balance sheet and ‘position it for sustainable long-term growth.’
Chapter 15 bankruptcy allows foreign debtors to apply for the protection of assets in America from creditors in the US. This is usually accompanied by equivalent filing in the company’s home country or bankruptcy.
It allows cooperation between the foreign courts and the US courts, and also other authorities of other countries involved in the cases.
A spokesperson for Virgin Atlantic said that the company was pursuing a ‘solvent restructuring’ under British law. This means the company is not yet going out of business or liquidation but the airline warned that if a deal with creditors is not accomplished, it could run out of funds within the next few months.
This comes a day after Richard Branson made an announcement about launching into space aboard Virgin Galactic aircraft, saying he will become one of the first passengers on his company’s rockets.
Virgin Atlantic has become Branson’s second airline to file for Chapter 15 bankruptcy.
In April, sister airline Virgin Australia also filed for Chapter 15 protection in the US and voluntary administration.
“The group’s financial position has been severely affected by the ongoing Covid-19 pandemic, which has caused unprecedented disruption to the global aviation industry,” Mr. Allison said.
“Passenger demand has plummeted to a level that would, until recently, have been unthinkable.”
He added: “As a result of the Covid-19 pandemic, the group is now undergoing a liquidity crisis.
“Absent a restructuring and an injection of new money, it is projected that the group’s cash flow would drop to a critical level by the week commencing 21 September 2020.”
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