This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Asset 3
  • About
  • People
  • Capabilities
  • Insights
  • Careers
  • Public Interest
  • Inclusion
  • Contact us
    Contact us
  • Locations
    Locations
  • Search
    Search
  • About
    • About
    • Message From the CEO
    • Firm History
    • Alumni
    • Alumni
    • In Memoriam
  • People
  • Capabilities
    • Practices
    • Industries
    • Global Reach: The Law Firm Network
    • Bankruptcy & Restructuring
    • Brand & Reputation Management
    • Intellectual Property
    • Litigation & Dispute Resolution
    • Special Situations, Distressed Debt and Debt Trading
    • Transactions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Energy & Environmental
    • Entertainment & Media
    • Investment Management 
    • Life Sciences
    • Technology
    • Real Estate
    • Bankruptcy & Restructuring
    • Bankruptcy Litigation
    • Mass Torts Bankruptcy
    • Intellectual Property
    • Intellectual Property Litigation
    • Patents
    • Trademark, Copyright & Advertising
    • Patent Trial and Appeals Board (PTAB)
    • Litigation & Dispute Resolution
    • Civil Fraud Litigation
    • Employment Practices and Litigation
    • Government Contracts Litigation
    • Intellectual Property Litigation
    • Insurance Recovery
    • Litigation Funding
    • M&A and Private Equity Litigation
    • Real Estate Litigation
    • Patent Trial and Appeals Board (PTAB)
    • UK Tax Controversy & Litigation
    • Special Situations, Distressed Debt and Debt Trading
    • Distressed Debt & Claims Trading
    • Litigation Funding
    • Finance
    • Real Estate Special Situations
    • Transactions
    • Capital Markets
    • Cross-Border Transactions
    • Emerging Growth Companies & Venture Capital
    • Employment
    • Finance
    • Franchising
    • Mergers & Acquisitions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Economic Sanctions & Export Controls
    • Energy & Environmental
    • Energy
    • Energy Transition
    • Environmental
    • Entertainment & Media
    • Brand & Reputation Management
    • Intellectual Property
    • Sports
    • Investment Management
    • Fund Formation
    • Private Equity Transactions
    • Distressed Debt
    • Emerging Growth Companies & Venture Capital
    • Family-Owned & Closely Held Businesses
    • Private Equity Litigation
    • Life Sciences
    • BR BioAdvisory Services
    • Technology
    • Artificial Intelligence
    • Cybersecurity & Data Privacy
    • Digital Commerce
    • Fintech
    • Real Estate
    • Hospitality & Leisure
    • Distressed Real Estate
    • Real Estate Special Situations
    • Real Estate Litigation
    • Wireless Network Infrastructure
  • Insights
    • Client News
    • Firm News
    • Briefings
    • Events
  • Careers
    • Experienced Lawyers
    • U.S. Law Students
    • London Trainee Program
    • Business Professionals
    • Professional Development
  • Public Interest
    • Brown Rudnick Charitable Foundation
    • Pro Bono & Community Service
  • Inclusion
    • Inclusion
    • Women in Business Series
  • Contact Us
  • Location
  • Search
  • About
    • About
    • Message From the CEO
    • Firm History
    • Alumni
    • Alumni
    • In Memoriam
  • People
  • Capabilities
    • Practices
    • Industries
    • Global Reach: The Law Firm Network
    • Bankruptcy & Restructuring
    • Brand & Reputation Management
    • Intellectual Property
    • Litigation & Dispute Resolution
    • Special Situations, Distressed Debt and Debt Trading
    • Transactions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Energy & Environmental
    • Entertainment & Media
    • Investment Management 
    • Life Sciences
    • Technology
    • Real Estate
    • Bankruptcy & Restructuring
    • Bankruptcy Litigation
    • Mass Torts Bankruptcy
    • Intellectual Property
    • Intellectual Property Litigation
    • Patents
    • Trademark, Copyright & Advertising
    • Patent Trial and Appeals Board (PTAB)
    • Litigation & Dispute Resolution
    • Civil Fraud Litigation
    • Employment Practices and Litigation
    • Government Contracts Litigation
    • Intellectual Property Litigation
    • Insurance Recovery
    • Litigation Funding
    • M&A and Private Equity Litigation
    • Real Estate Litigation
    • Patent Trial and Appeals Board (PTAB)
    • UK Tax Controversy & Litigation
    • Special Situations, Distressed Debt and Debt Trading
    • Distressed Debt & Claims Trading
    • Litigation Funding
    • Finance
    • Real Estate Special Situations
    • Transactions
    • Capital Markets
    • Cross-Border Transactions
    • Emerging Growth Companies & Venture Capital
    • Employment
    • Finance
    • Franchising
    • Mergers & Acquisitions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Economic Sanctions & Export Controls
    • Energy & Environmental
    • Energy
    • Energy Transition
    • Environmental
    • Entertainment & Media
    • Brand & Reputation Management
    • Intellectual Property
    • Sports
    • Investment Management
    • Fund Formation
    • Private Equity Transactions
    • Distressed Debt
    • Emerging Growth Companies & Venture Capital
    • Family-Owned & Closely Held Businesses
    • Private Equity Litigation
    • Life Sciences
    • BR BioAdvisory Services
    • Technology
    • Artificial Intelligence
    • Cybersecurity & Data Privacy
    • Digital Commerce
    • Fintech
    • Real Estate
    • Hospitality & Leisure
    • Distressed Real Estate
    • Real Estate Special Situations
    • Real Estate Litigation
    • Wireless Network Infrastructure
  • Insights
    • Client News
    • Firm News
    • Briefings
    • Events
  • Careers
    • Experienced Lawyers
    • U.S. Law Students
    • London Trainee Program
    • Business Professionals
    • Professional Development
  • Public Interest
    • Brown Rudnick Charitable Foundation
    • Pro Bono & Community Service
  • Inclusion
    • Inclusion
    • Women in Business Series

Search People

Search by last name

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z

see all people

Asset 3
  • LinkedIn
  • X (formerly known as Twitter)
  • Facebook
  • Instagram
  • Threads
  • YouTube
  • rss
  • Contact Us
  • Terms of Use
  • Privacy
  • Sitemap
  • LinkedIn
  • X (formerly known as Twitter)
  • Facebook
  • Instagram
  • Threads
  • YouTube
  • rss

© 2024 Brown Rudnick LLP. Attorney advertising.

All Rights Reserved.

All Posts Subscribe
print-logo
10/8/2020 12:00:00 AM | 3 minute read

U.K. Court Sanctions First New Restructuring Plan for Virgin

2

Get in touch

Avatar
Chloë Kealey
Associate

Get in touch

Avatar
Chloë Kealey
Associate
2

In June 2020, the Corporate Insolvency and Governance Act came into force, introducing a new restructuring tool into Part 26A of the Companies Act 2006.

On 2 September 2020, the U.K. Court sanctioned the first Restructuring Plan under the new legislation for Virgin Atlantic Airways Limited ("the Company"). Virgin's airline business was adversely impacted by COVID-19 and it was estimated that the Company's cash flow levels would become critical by the week beginning 21 September and that it would run out of available cash altogether during the week beginning 5 October. Without a restructuring, the Company's directors would have had to place it into administration in mid-September.

To avoid this, the Company proposed the Restructuring Plan which involved four classes of creditors: (1) RCF Lenders under the Company's $280m fully drawn secured revolving credit facility; (2) Operating Lessors under the Company's 24 aircraft operating leases; (3) Connected Party Creditors, including creditors in the Virgin Group and Delta Air Lines Group with whom the Company had intellectual property and joint venture agreements; and (4) Trade Creditors.

The new Restructuring Plan provided for in Part 26A is similar to a Scheme of Arrangement under Part 26 of the Companies Act 2006, with one of the key differences being the cross-class cram down mechanism for dissenting classes of creditors. The cram down was not needed in Virgin's case because, by the time of the Convening Hearing, the RCF Lenders, the Operating Lessors and the Connected Party Creditors had already agreed to support the plan and it was subsequently also approved by the Trade Creditors.

Despite the cram down not being used, the court made some other useful points regarding Restructuring Plans.

Mr Justice Snowden confirmed that the court has a general discretion as to whether to sanction a Restructuring Plan under Part 26A and that the authorities under Part 26 can assist the court in deciding how to exercise its discretion.

The judge also found that as all classes of creditors approved the Virgin Restructuring Plan, he was in a similar position as he would have been had the Plan been proposed as a Scheme of Arrangement. He could therefore follow the "tried and tested" approach to exercising his discretion established under Part 26 as he did not have to consider whether the need for a cram down had arisen.

Despite this, Mr Justice Snowden said that the court would not normally entertain an application for a Scheme of Arrangement where it was known in advance that the creditors had consented and it is not "normal practice" to include classes in a Part 26 Scheme where 100% of the relevant creditors are known to be willing to consent. He noted, at paragraph 49 of the judgment, that the fully consenting classes may have been included with a view to arguing that the cram down power would have been available if the Trade Creditors had not voted in favour of the Plan but he clarified, at paragraph 50, that he should not be taken to have decided that the power could be activated by including within a Plan a class of creditors who would otherwise all have been prepared to enter into consensual arrangements to give effect to the restructuring of their rights.

The court also looked at whether the classes of creditors were fairly represented. A Restructuring Plan requires approval from 75% in value of members and does not have a number threshold. The RCF Lenders, Operating Lessors and Connected Party Creditors had a 100% turnout and vote in favour at their creditor meetings. At the Trade Creditors' meeting there was an 89% turnout by value and a 99% vote in favour so the 75% threshold was met. However, some of the Company's Trade Creditors were excluded from the class.

Mr Justice Snowden considered the ability for a company to exclude some creditors with whom it does not want to propose an arrangement a valuable feature of a Scheme of Arrangement and said he saw no reason why it should not also be available under a Part 26A Restructuring Plan. He noted, however, that the exclusion of creditors does have implications for the exercise of the court’s discretion as to whether to endorse the decision of the majority at the relevant creditors' meeting. He therefore found it necessary to consider whether the classes of creditors are fairly represented.

Overall, Virgin's Restructuring Plan looked much like a Scheme of Arrangement and, despite the court making some useful points, it leaves many questions unanswered, including how the cross-class cram down power will be used in practice.

featured image

Sign up to receive our latest BRiefings delivered directly to your inbox. Subscribe

Tags

restructuring and insolvency, bankruptcy & restructuring

Get in touch

Avatar
Chloë Kealey
Associate

Get in touch

Avatar
Chloë Kealey
Associate
DOJ Updates White-Collar Enforcement Priorities
5/15/2025 8:37:21 PM

DOJ Updates White-Collar Enforcement Priorities

By Daniel Sachs Steven Tyrrell Stephen Best Angela Papalaskaris +1 more...

Show less

DOJ Updates White-Collar Crime Enforcement Priorities  On May 12, 2025, the Criminal Division of the U.S. Department of Justice (DOJ)...
9
9

Latest Insights

Renewable Transport Fuel Obligation (RTFO) and Tax Disputes: Navigating a Complex Compliance Landscape
5/12/2025 12:30:58 PM

Renewable Transport Fuel Obligation (RTFO) and Tax Disputes: Navigating a Complex Compliance Landscape

By Matthew Sharp
2
2
Raising the Stakes: UK Government Consults on the Tax Treatment of Remote Gaming and Gambling
5/9/2025 2:45:43 PM

Raising the Stakes: UK Government Consults on the Tax Treatment of Remote Gaming and Gambling

By Matthew Sharp Menelaos Karampetsos
1
16
17
[2025] UKUT 00124 (TCC) George Mantides Limited v HMRC: Further Ammunition for HMRC in Its Battle Against Self-Employment in Healthcare?
5/1/2025 2:34:46 PM

[2025] UKUT 00124 (TCC) George Mantides Limited v HMRC: Further Ammunition for HMRC in Its Battle Against Self-Employment in Healthcare?

By Matthew Sharp
44
44