London: Virgin Atlantic Airways is poised to announce a rescue worth at least 1 billion pounds ($1.25 billion), after clearing the last major hurdle to the deal.
Negotiations with credit-card processors holding back some 200 million pounds of sales have been resolved. An announcement could come Tuesday, after final approval of the package.
US hedge fund Davidson Kempner Capital Management will provide about 200 million pounds in fresh lending. Billionaire founder Richard Branson will contribute about the same after raising money from his Virgin Galactic Holdings Inc. space venture.
The UK airline will also get relief on some 400 million pounds owed, with owners Delta Air Lines Inc. and Branson's Virgin Group, along with jet-leasing firms, granting concessions on payment terms, the people said.
The rescue will mark a coup for Branson, who managed to secure a private bailout after the UK government refused to contribute taxpayer funds when Virgin Atlantic was grounded by the coronavirus crisis. After months of uncertainty, the mogul - who turns 70 this week - is set to retain control of an airline he founded in 1984. Still, its future prospects hinge on the return of trans-Atlantic travel.
New York-based Davidson Kempner, which has about $30 billion of assets under management, won the deal after offering more favorable terms than other potential backers.
Not in the mood
Branson's abode in British Virgin Islands - where residents pay no income or capital-gains taxes - made a taxpayer bailout politically controversial. The UK government earlier rejected his plea for a loan guarantee for Virgin Atlantic, on the grounds that its credit rating was too low.
The snub launched weeks of frenzied talks to save the stricken airline. CEO Shai Weiss pitched his recovery strategy to a dozen potential supporters in a virtual presentation in May.
That led to interest from several parties, while Branson raised more than $400 million to help his companies by selling shares of Virgin Galactic.
One of the thorniest issues involved freeing up credit-card payments withheld by settlement firms in case Virgin Atlantic went bust. That matter was resolved in the last few days, the people said.
Delta, which owns 49 per cent of Virgin Atlantic, has said it wouldn't put in more cash. However, the US airline offered to make a significant contribution by delaying outstanding marketing fees and other dues.
Born to challenge
Branson, then a 30-something music entrepreneur, started Virgin Atlantic after a trip to the Caribbean on a commercial airliner was canceled at the last minute. He chartered a plane on the spot, paying with his credit card, and sold seats to the other passengers whose flight had been bumped.
In time, the company grew to become the only credible UK competitor to British Airways, inciting an intense rivalry that continues to this day. Branson's airline, with more than 40 jets in its fleet, operates mainly on trans-Atlantic routes between London and US destinations like New York and Los Angeles.
Normally it's the most profitable corner of the entire airline industry. But the carrier has had to park its fleet due to the coronavirus, and said it would cut 3,150 jobs, after restrictions on flying between the US and the UK caused a collapse in the trade.
