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Friday, September 25, 2020

Virgin Atlantic Seeks £ 900 Million in Private Funding

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Embattled Virgin Atlantic is in a race for survival as it is urgently seeking up to £ 900 million in funding. The airline wants to suspend funding in early July. As the slowdown in travel continues, Virgin Atlantic flirts with the collapse and has administrators lined up, if that happens.

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Virgin Atlantic is urgently seeking funding as it approaches the collapse. Photo: Getty Images

Virgin Atlantic urgently seeks up to £ 900 million in funding

Several reports indicate that Virgin Atlantic is seeking a privately funded rescue agreement. According to The Guardian, the airline is trying to borrow £ 250 million from hedge funds and to get an additional £ 200 million from its shareholders.

In the event that no funding is obtained, Virgin Atlantic could enter into administration. The airline has appointed Alvarez and Marshall as potential directors.

Notable shareholders of Virgin Atlantic include Richard Branson and Delta Air Lines. Long-haul airline expected to take years to recover from the slowdown in travel. Virgin Atlantic CEO Shai Weiss is said to have raised funds over the weekend. Discussions with sixty parties were underway.

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Virgin Atlantic has lined up directors in the event of an airline collapse. Photo: Tomas Del Coro via Wikimedia Commons

In addition, the airline is discussing with suppliers and lessors of aircraft the deferral of payments worth hundreds of millions of pounds. An important part of any agreement would involve deferring payments to help support an already battered balance sheet.

Davidson Kempner Capital Management and Elliott are two key hedge funds involved in the discussions. At this point, Elliot seems to be the favorite. Elliot’s offer would be subscribed by Greybull Capital. Greyball previously owned Monarch Airlines.

In a statement, Virgin Atlantic said:

“We are continuing to explore all of the options available for obtaining additional external financing as part of a full and solvent airline recapitalization.”

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Bonding agreements and bondholders complicate the financing offer

Virgin Atlantic’s ATOL bonding agreements have complicated the situation. ATOL (which stands for Air Travel Organizer’s License) is a British financial protection system which protects future flight reservations not yet issued. Virgin Atlantic is said to have approached the Civil Aviation Authority of the United Kingdom to temporarily ask it to withdraw.

In addition, any transaction would require the approval of bondholders who loaned £ 220 million to Virgin Atlantic in 2015, secured against slots at Heathrow.

The British government remains on the sidelines. Although it has not ruled out emergency financing, the government considers itself a lender of last resort. Virgin Atlantic will have to explore all other possible funding avenues in vain before the government plans to step up its operations.

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The British government is on the sidelines as a potential lender of last resort. Photo: Aero Pixels via Wikimedia Commons

In April, Virgin Atlantic contacted the British government for a £ 500m commercial loan package. The government refused aid.

“According to the Chancellor’s letter of March 24, [the] the government is seen as a lender of last resort, and rightly so. We have already made tough decisions and taken decisive action to reduce costs, preserve our cash flow and protect as many jobs as possible, ” said Virgin Atlantic.

A hot year for Virgin Atlantic

The race for funding closes a torrid year for Virgin Atlantic. As a long-haul international airline, slow travel and closed borders have hit Virgin Atlantic hard. In the past year, the company lost more than £ 26 million. The outlook for this exercise is much darker.

In addition, Virgin Atlantic has closed its Gatwick base and laid off about a third of its workforce. It is reducing the size of its fleet and remove its iconic Boeing 747. The airline expects demand to remain significantly down throughout 2020. In addition, demand will be slow to return to 2019 levels.

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