Virgin Atlantic: Privately-Funded Rescue?
It has come to light that British leisure airline Virgin Atlantic Airways (VS) is currently undergoing discussions this weekend with private stakeholders to secure a rescue package of £800m or a potential £900m. Internal sources have said that they are now focused on “an informal deadline” in early July to have the agreement in place.
Most of the money injected will not be fresh capital for the airline but will help cashflow by deferring fees and other payments that the company still owes. Virgin Atlantic’s existing shareholders would provide around £250m of the new funding.
For this weekend, there are two proposals from rival hedge funds Davidson Kempner Capital Management and Elliott to provide up to £250m in debt funding to the British carrier are currently being considered.Elliott’s proposal is known to be supported by Greybull Capital, the former owner of the defunct airline Monarch. Alongside this, VS has also approached the Civil Aviation Authority (CAA) to temporarily ease requirements to its ATOL bonding arrangements.At this stage, the British Government has ruled out providing any funding for the airline; however, VS has been proceeding on the basis that no such support would come to light – hence it sourcing agreements for private funding. If the discussions become successful and a deal is completed, it would also include an amend-and-extend agreement with the providers of VS revolving around the credit facility.
Recently, VS has also retired its entire fleet of Boeing 747’s (total of seven) alongside cutting 3,150 jobs and ceasing its services from London Gatwick. The airline will now primarily focus on services from London Heathrow and Manchester in the UK.
