(Sharecast News) - Virgin Atlantic declared itself bankrupt as it sought protection from creditors in the US, according to a court filing in New York on Tuesday.
The airline wants protection under chapter 15 of US bankruptcy laws, allowing a foreign debtor to shield assets in the country as it looks to restructure after grounding the majority of its fleet in response to coronavirus travel bans.
Last month the troubled carrier announced a £1.2bn rescue package with private creditors to secure funding to survive for another 18 months. Founder Richard Branson had controversially begged the UK government for a bailout but was rebuffed.
The bankruptcy follows Virgin Australia's move into administration in April, owing $6.8bn to more than 12,000 creditors. New owner, the US private equity firm Bain Capital, has wasted no time in taking the axe to costs with plans to fire a third of the airline's 9,000 workers.
Virgin Atlantic's filing in the US bankruptcy court in the southern district of New York said it has negotiated a deal with stakeholders "for a consensual recapitalization" that will get debt off its balance sheet and "immediately position it for sustainable long-term growth".
It also filed a proceeding in the High Court in London, where the airline Atlantic obtained approval on Tuesday to convene meetings of affected creditors to vote on the plan on 25 August.
The airline, 51% owned by Branson's Virgin Group and 49% by US airline Delta, closed its base at Gatwick Airport and cut more than 3,500 jobs to deal with the impact of the Covid-19 crisis.
It said it needed to recapitalise "to not only survive the exigent threats posed by the Covid-19 global pandemic but to thrive once the immediate global health crisis passes".
Virgin said in a court filing reservations had slumped 89% year on year and current demand for the second half of 2020 was running at a quarter of 2019 levels.
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