The First UK Restructuring Plan Sanctioned: Learning Points from Virgin Atlantic’s Plan Process
At a Glance
Kirkland is advising the UK Civil Aviation Authority on the restructuring of Virgin Atlantic Airways Limited (the “Company”), in the ground-breaking first restructuring plan under the new Part 26A of the Companies Act 2006.
The Company’s plan was sanctioned by the court on 2 September; the plan and the broader recapitalisation became effective on Friday, 4 September. Of the four classes of creditors under the plan, three classes had unanimously approved the plan prior to the convening hearing (the first court hearing, on 4 August). The remaining class, comprised of certain trade creditors, overwhelmingly approved the plan: 99% by value, of those voting, voted in favour, on 25 August.
This represents a major first test of the new procedure, recently introduced under the Corporate Insolvency and Governance Act 2020 (effective from 26 June).
The new plan offers the possibility of cross-class cram-down, to impose a restructuring on dissenting stakeholders. Ultimately, however, cross-class cram-down was not engaged in this case, given each class approved the plan. Accordingly, this critical element of the procedure remains untested.
The Company’s plan forms part of its broader solvent recapitalisation deal and seeks to ensure the survival of the airline against the backdrop of the existential crisis in the travel industry, owing to Covid-19 and related restrictions. Crucially, the restructuring allows the Group’s planes to continue in operation.
The convening and sanction hearings raised no major surprises, but illustrated a number of practical points which will inform practice and assist the growing numbers of companies and stakeholders considering pursuing a plan on potential restructurings. Those points are explored in this deck.
