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Law360 (August 7, 2020, 4:05 PM EDT) -- A New York bankruptcy judge Friday granted Chapter 15 recognition to Virgin Atlantic's U.K. restructuring proceedings and set the airline's U.S. contracts in place until the company goes to court in the U.K. in September.
Following a brief telephonic hearing, U.S. Bankruptcy Judge James Garrity granted Virgin Atlantic's petition for Chapter 15 recognition of its restructuring and extended temporary restrictions preventing parties from using the restructuring as a reason to cancel contracts.
On Tuesday, a London judge gave Virgin Atlantic the go-ahead to take its planned £1.2 billion ($1.5 billion) recapitalization to creditors for approval, after the airline said it is facing a severe liquidity crisis because of the coronavirus pandemic.
Virgin Atlantic, which usually flies six million passengers a year, restarted passenger flights in July to a limited number of destinations, but current interest is at a quarter of 2019 levels. It predicts demand is likely to remain low for the rest of the year, according to court documents.
The company said it has secured new debt facilities worth £170 million, as well as a further £300 million facility from an investment subsidiary. It says the refinancing plan will reduce its debt to a sustainable level and permit it to operate as a "going concern."
At Friday's hearing, counsel for the airline told Judge Garrity that a U.K. court hearing to formally sanction the plan has been set for September 2.
At the hearing, Judge Garrity — who mentioned he was working without electricity due to a New York City area power outage resulting from damage from a Tuesday storm — granted Virgin Atlantic's request to recognize the U.K. case as the "main proceeding" in the case, providing protection for the company's U.S. assets.
He also agreed to extend until the September hearing a preliminary restraining order he had issued Tuesday enforcing English insolvency law regarding the termination of contracts with parties in insolvency proceedings.
In its court filings, Virgin Atlantic said U.K. law prevents parties from terminating contracts — with exceptions for certain financial and small business contracts — with a party in an insolvency case due to the filing.
Virgin Atlantic is represented by Ken Coleman, Jonathan Cho and Joseph Badtke-Berkow of Allen & Overy LLP.
The case is In re: Virgin Atlantic Airways Ltd., case number 20-11804, in the U.S. Bankruptcy Court for the Southern District of New York.
--Additional reporting by Paige Long. Editing by Steven Edelstone.
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