Virgin Atlantic (VS, London Heathrow) has filed for bankruptcy protection under US Chapter 15 in the Bankruptcy Court for the Southern District of New York, Reuters has reported.
Chapter 15 is different to Chapter 11 as it is used predominantly by foreign based companies with a presence in the United States, seeking to protect themselves against US creditors while they undergo restructuring in their home country.
Details of the filing have yet to be publicly disclosed. The airline has not filed for bankruptcy in its home country, the United Kingdom.
Just hours earlier, Virgin Atlantic said during a court hearing in London that it would run out of cash next month unless a GBP1.2 billion pound (USD1.6 billion) rescue deal was approved. Creditors are due to vote on the package on August 25. Virgin Atlantic said that three out of four groups of creditors have already expressed their intention to back the rescue deal.
The airline said that if the deal is not approved, its projections showed that its available cash would drop to just GPB49 million (USD64 million) by the end of September, forcing it to sell its London Heathrow slots and effectively shut down its business.
"With support already secured from the majority of stakeholders, it's expected that the restructuring plan and recapitalization will come into effect in September," the airline's spokesperson told Bloomberg.
A Virgin Atlantic lawyer said that after the creditors' meetings on August 25, the final rescue deal would have to be approved by September 2. Failing that, the airline will be placed under administration.
Virgin Atlantic is 49% owned by Delta Air Lines (DL, Atlanta Hartsfield Jackson). The American carrier also controls a 49% stake in Aeroméxico (AM, México City International) and a 20% stake in LATAM Airlines Group, both of which are currently under Chapter 11 bankruptcy protection.
