*Cash flow drops to 鈥榗ritical levels鈥�, would 鈥榬un out of money altogether鈥� by week beginning September 28 鈹�Report

*Firm 鈥榝undamentally sound鈥� but restructuring, fresh injection of funds critical to securing its future

Isola Moses | 绿帽献妻

In what some analysts have described as the 鈥榙evastated airline industry鈥� due to the damaging impacts of the novel Coronavirus disease (COVID-19) on the sector, Sir Richard Branson鈥檚 Virgin Atlantic has filed for bankruptcy as it currently battles to secure its rescue deal.

绿帽献妻 reports that the leading airline has disclosed it could run out of cash September 2020 if creditors do not approve a 拢1.2billion rescue deal.

Quoting a court in the United Kingdom (UK), the aviation firm鈥檚 lawyers disclosed that the airline is 鈥渇undamentally sound鈥� but a restructuring and fresh injection of money is critical to securing its future, Virgin’s lawyers said.

The plans need approval from creditors under a court-sanctioned process.

It was learnt that as part of that process Virgin Atlantic is also seeking protection under Chapter 15 of the US bankruptcy code.

The Virgin Atlantic move in this regard, according to report, enables a foreign debtor to shield assets in the country.

Having reached 鈥榗ritical levels鈥� like other airlines as a result of the disruption occasioned by the virus, Virgin Atlantic’s finances have been hit hard by the collapse in air travel due to the pandemic, sources said.

The court in London heard that the airline’s cash flow would drop to 鈥渃ritical levels鈥� by the middle of next month, and it would 鈥渞un out of money altogether鈥� by the week beginning September 28, 2020.

It is recalled the aviation company July 2020 agreed to a rescue deal worth 拢1.2billion ($1.6billion) to secure its future beyond the Coronavirus crisis.

Mr. David Allison QC, for Virgin Atlantic, told Mr. Justice Trower in written submissions that the group had 鈥渁 fundamentally sound business model which was not in any problems at all before the COVID-19 pandemic.鈥�

Allison said: 鈥淧assenger demand has plummeted to a level that would, until recently, have been unthinkable.

鈥淎s a result of the COVID-19 pandemic, the group is now undergoing a liquidity crisis.”

According to the company鈥檚 lawyer, without a 鈥渟olvent recapitalization鈥�, including an injection of new money, Virgin Atlantic’s Directors would have 鈥渘o choice鈥� but to place the company into administration in mid-September 2020 in order to wind down the business and sell any assets, where possible.

He said the restructuring needed to be sanctioned by early September. Mr Justice Trower gave the go-ahead for a meeting of creditors August 25.

Meanwhile, Virgin Atlantic has filed for US bankruptcy protection, saying it had negotiated a deal with stakeholders 鈥渇or a consensual recapitalisation鈥� that will get debt off its balance sheet and 鈥渋mmediately position it for sustainable long-term growth鈥�.

The company firm, in a statement Wednesday, August 5 explained that it continues to operate its limited flight schedule.

The statement indicates that 鈥渨ith support already secured from the majority of stakeholders, it’s expected that the restructuring plan and recapitalisation will come into effect in September.

鈥淲e remain confident in the plan.鈥�

Under the airline’s restructuring plan, Sir Richard’s Virgin Group will inject 拢200million with additional funds provided by investors and creditors, report stated.

Earlier during the pandemic, the billionaire Branson had a request for UK Government money rejected, thereby leaving the airline in a race against time to secure new investment.

In May, Virgin Atlantic, which is 51% owned by Virgin Group and 49% by US airline Delta, announced that it would cut more than 3,000 jobs in the UK and close its operation at Gatwick airport.