British airline Virgin Atlantic has filed for Chapter 15 bankruptcy protection in the United States. The company filed for bankruptcy in New York on Tuesday, becoming the latest airline to fall victim to the massive travel disruptions caused by the coronavirus pandemic.
A Chapter 15 filing is a special type of bankruptcy protection under U.S. bankruptcy law that coordinates assets in multiple countries. Virgin Atlantic aims to protect its assets in the U.S. while it proceeds with its restructuring plan in the UK. The airline, owned by billionaire Richard Branson, is currently in the process of finalizing its $1.5 billion rescue plan.
The filing in the U.S. coincided with a court hearing in the UK as part of the company's bid to obtain regulatory approval to negotiate with its creditors. Virgin Atlantic is planning to call a meeting with its creditors on August 25. The company plans to vote on the proposed terms of its latest restructuring plan aimed at saving the company from what it called the "worst crisis" ever to befall the aviation industry.
Virgin Atlantic initially unveiled its proposed $1.5 billion restructuring plan last month. The company expects the plan to keep it solvent over the next few months as it restarts its commercial airline operations. The plan has so far gotten the support of some of the company's major shareholders, including Delta Air Lines.
Under the restructuring plan, Virgin Atlantic will be securing new financing from a number of investors. Richard Branson's Virgin Group has agreed to contribute $262 million to the plan, while U.S. hedge fund Davidson Kempner has agreed to give $188 million in secured financing.
Like other global airlines, Virgin Atlantic suffered the brunt of the economic impact of the coronavirus pandemic this year. The months of border restrictions and movement lockdowns had ground the aviation industry to a near halt, costing airlines billions of dollars in losses.
Over the past two quarters, Virgin Atlantic laid off more than 3,550 of its employees. It also closed down its operating base in London's Gatwick airport due to the prolonged travel demand slump.
On Wednesday, Virgin Atlantic's sister company Virgin Australia began implementing its massive restructuring plan under its new owner, Bain Capital. More than 3,000 workers, or roughly a third of its total workforce, were laid off.
