Virgin Atlantic receives go-ahead for restructuring plan from US court

BY Fraser Tennant

Following its Chapter 15 filing last week to protect itself from creditors in the US while undertaking a solvent recapitalisation in the UK, Virgin Atlantic has received support for its restructuring plan from a US court.

The restructuring is based on a five-year business plan and, with the support of shareholders Virgin Group and Delta, new private investors and existing creditors, paves the way for the airline to rebuild its balance sheet and return to profitability from 2022.

At the same time, the recapitalisation will deliver a refinancing package worth £1.2bn over the next 18 months, in addition to the self-help measures already taken, including cost savings of approximately £280m per year and £880m rephasing and financing of aircraft deliveries over the next five years. 

The airline is one of many in the aviation industry to have been severely impacted by the coronavirus (COVID-19) pandemic, having closed its Gatwick base with the loss of 3500 jobs.  

“Virgin Atlantic has reached another important milestone towards securing its future, undertaking a hearing in the US courts to support its plan for a private-only solvent recapitalisation of the airline, following the severe impact of the COVID-19 pandemic on the global economy, the nation and the travel and aviation industry,” said a Virgin Atlantic spokesperson. “The US proceedings were commenced under provisions that allow US courts to recognise foreign restructuring processes. In the case of Virgin Atlantic, the process we have asked to be recognised is a solvent restructuring of an English company under Part 26A of the UK Companies Act 2006.”

“The US court has supported the company’s restructuring plan,” continued Virgin Atlantic. “The US proceeding is a standard procedural step to protect the airline’s assets while Virgin Atlantic’s recapitalisation is completed in the UK. The US court has scheduled a hearing for 3 September 2020 to immediately follow the final hearing before the English court.

“With support already secured from the majority of our creditors and stakeholders, it is expected that the restructuring plan and solvent recapitalisation will come into effect in September. We remain confident in the plan.”

News: US Courts Support Virgin Atlantic’s UK Recapitalization Plan

Virgin Atlantic files for Chapter 15 bankruptcy protection

BY Fraser Tennant

At a time when coronavirus (COVID-19) is having a severe impact on the aviation industry, Virgin Atlantic Airways is seeking protection from creditors in the US under Chapter 15 of the US Bankruptcy Code – a mechanism that allows US courts to recognise foreign restructuring processes.

In the court filing, the beleaguered British airline stated that it had negotiated an agreement with stakeholders that would allow for “a consensual recapitalisation” that would remove debt from its balance sheet and “immediately position it for sustainable long-term growth”.

The Chapter 15 filing is alongside proceedings in a UK court, which saw the airline obtain approval earlier this week for affected creditors to vote on the restructuring plan. The vote is scheduled to take place on 25 August.

“In order to progress the private-only solvent recapitalisation of the airline, the restructuring plan is going through a court-sanctioned process under Part 26A of the Companies Act 2006, to secure approval from all relevant creditors before implementation,” said a Virgin Atlantic spokesperson. “With support already secured from the majority of stakeholders, it is expected that the plan, and recapitalisation, will come into effect in September. We remain confident in the plan.”

The restructuring plan – agreed with stakeholders on 14 July – will deliver a refinancing package worth around £1.2bn over the next 18 months, including cost savings of approximately £280m per year and an estimated £880m rephasing and financing of aircraft deliveries over the next five years.

Once approved and implemented, Virgin Atlantic expects the restructuring plan to help it to return to profitability from 2022.

One of many players operating in an industry to be majorly impacted by COVID-19, Virgin Atlantic – 51 percent owned by Richard Branson’s Virgin Group and 49 percent by US airline Delta – closed its Gatwick base in May and cut more than 3500 jobs in an attempt to absorb the devastating fallout from the pandemic, which has grounded planes and decimated demand for air travel.

“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect,” said Shai Weiss, chief executive at Virgin Atlantic, when the restructuring plan was announced last month. “While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, the pursuit of our vision continues.”

News: Virgin Atlantic Airways seeks U.S. Chapter 15 bankruptcy protection

Varian and Siemens Healthineers combine in $16.4bn deal

BY Fraser Tennant

In a deal which creates a global healthcare leader with a comprehensive cancer care portfolio, medical device and software manufacturer Varian Medical Systems is to combine with healthcare technology supplier Siemens Healthineers AG in an all-cash transaction valued at $16.4bn.

Under the terms of the agreement, German health group Siemens Healthineers will acquire all outstanding shares of US firm Varian for $177.50 per share in cash.

The combined company will offer an integrated platform of end-to-end oncology solutions to address the entire continuum of cancer care, from screening and diagnosis to care delivery and post-treatment survivorship.

Through the transaction, Siemens intends to address a long-term rise in the incidence of cancer – from 14 million cases in 2010 to a forecast of 25 million in 2030.

"This transaction represents an important milestone in our company's history, and our board is confident that this is the right path forward for Varian," said Dow Wilson, president and chief executive of Varian. "In addition to delivering immediate and compelling value to our shareholders, the combination with Siemens Healthineers brings us even closer to realising our transformative vision of a world without fear of cancer.

The transaction has been unanimously approved by Varian's board of directors.

“With this combination of two leading companies we make two leaps in one step: a leap in the fight against cancer and a leap in our overall impact on healthcare,” said Dr Bernd Montag, chief executive of Siemens Healthineers. “This decisive moment in the history of our companies means more hope and less uncertainty for patients, an even stronger partner for our customers, and for society more effective and efficient medical care.”

The transaction is expected to close in the first half of 2021, subject to approval by Varian shareholders, receipt of regulatory approvals and other customary closing conditions. It is expected that Varian will continue to operate under the Varian name as an independent company within Siemens Healthineers.

Dr Montag concluded: “Together with Varian's outstanding and passionate employees, we will shape the future of healthcare more than ever before."

News: Siemens Healthineers to acquire Varian for $16.4 billion

Remington Arms files for Chapter 11 bankruptcy

BY Richard Summerfield

Gunmaker Remington Arms has filed for Chapter 11 bankruptcy protection in the Bankruptcy Court of the Northern District of Alabama.

The company listed assets and liabilities both in the range of $100m to $500m. Remington said it had $437.5m in sales in 2019, about half what it earned in 2016. The filing is the second time in two years that the company has filed for Chapter 11 bankruptcy. In March 2018, Remington filed for bankruptcy and announced it was seeking to reduce its debt by $620m. It exited the Chapter 11 process the same year when ownership of the company transferred to some of its former creditors, including Franklin Templeton Investments and JPMorgan Asset Management.

The company’s latest filing comes after the collapse of a mooted sale. Recently, Remington had been in discussions over a possible sale to the Navajo Nation, however The Wall Street Journal, citing a person with knowledge of the situation, reported that those discussions had broken down.

Remington’s financial problems have been ongoing for some time. The firearms industry faced a public backlash after the 2012 incident at Sandy Hook Elementary school which left 20 children and six adults dead. Remington bore the brunt of the criticism after it emerged that the company had manufactured the AR-15-style rifle, the Bushmaster, used by the gunman.

The families of the Sandy Hook victims sued the company, and Remington took on debt, both from paying hefty legal fees and from buying out investors that wanted to divest after a wave of negative public sentiment toward the company. That legal battle is still ongoing and has undoubtedly had an impact on the company’s finances.

In response to the filing, the Sandy Hook families released a statement expressing concern that the company would use the bankruptcy process to escape any potential financial liability stemming from their lawsuit.

Remington’s filing comes amid a reported a spike in firearms sales in the US. Unrest has grown across the country since the death of George Floyd and the escalation of calls to defund the police.

News: U.S. gunmaker Remington files for bankruptcy again

Investment in UK digitalisation stalls despite COVID-19, reveals new survey

BY Fraser Tennant

More than half (56 percent) of businesses in the UK are not planning to increase investment in digital transformation, despite the coronavirus (COVID-19) pandemic accelerating the need for digitalisation, according to a survey published this week by Cheil UK.

The survey, which features the views of more than 200 senior decision makers from medium to large businesses in the UK on their plans for digital transformation post-COVID-19, reveals a general lack of continuity as to what the term ‘digital transformation’ means.

The retail sector, for example, lacks unity, according to the survey, with the majority of retail leaders disagreeing on what digital transformation means for their industry. Similarly, 33 percent of financial services sector respondents said their digital transformation plans had been “rolled back a lot” by the pandemic.

More promisingly, when asked what digital transformation means to their business, 48 percent of financial services sector leaders said optimising online performance and investing in new technology for in-store experiences, while 41 percent indicated setting up new digital propositions alongside core business.

“Challenges with budgets are apparent and valid, but we will see the ramifications of not investing in direct to consumer, digital and customer service in the coming months and years,” said David Bedford, director of digital strategy at Cheil UK. “This is not just about moving capabilities online; consumers expect to be kept safe when shopping in store and investment in digital capabilities – from virtual reality to contactless payments to increasing hygienic shopping experiences – is key to success in the future.”

Of the sectors planning to invest more in digital transformation, the top response among business leaders to improve customer experience was implementing faster delivery solutions and easier returns – a key challenge during lockdown as commerce switched to online. Other popular solutions included creating new products, improving site search, and better data collation and interrogation.

“The growing appetite for online purchases should be a wake-up call for those still asleep when it comes to ecommerce and digital capabilities,” continued Mr Bedford. “If you cannot provide the shopping experience your customer wants when they want it, they will move on.”

The survey also found that 75 percent of respondents were unimpressed with the majority of other businesses’ online customer experience.

Mr Bedford concluded: “The customer experience is key, and in a COVID-19 and post-COVID-19 world, this has to be considered and embedded as part of digital transformation to meet the needs of today’s customer.”

News: UK business leaders scale back plans to invest in digital transformation