Re Virgin Atlantic Airways Limited

The court granted the applicant company an order under section 901C(1) of the Companies Act 2006 summoning meetings of four classes of creditors to consider a Part 26A restructuring plan. The judge held that the statutory threshold in s.901A was met: the company had encountered financial difficulties affecting its ability to continue as a going concern (Condition A) and the proposed compromise or arrangement had the purpose of mitigating those difficulties (Condition B).

The court applied Part 26 principles to class constitution, concluding that the RCF lenders, the operating lessors, the connected party creditors and the trade creditors each formed properly constituted classes. The Practice Statement requirements for notification were applied; the court found the steps taken to notify Trade Plan Creditors (letters, an addendum and a webinar) and the 21‑day timetable were sufficient in the urgent commercial circumstances.

The court also addressed international jurisdiction under the Recast Judgments Regulation, concluding that Article 8 provided a sufficient basis for jurisdiction because sufficient scheme creditors were domiciled in England. The judge authorised a virtual meeting procedure, made a declaration as to the company’s US Chapter 15 foreign representative appointment, and ordered that the company be given notice of any application to inspect the court file under CPR 5.4D(2).

Background and nature of application.

The applicant, Virgin Atlantic Airways Limited, applied under s.901C(1) Companies Act 2006 (Part 26A) for directions summoning meetings of certain creditors to consider and, if thought fit, approve a restructuring plan as part of a broader recapitalisation. The company’s business had been severely affected by the COVID‑19 pandemic, producing a critical liquidity crisis and a real prospect of administration in September 2020 absent recapitalisation and compromise with creditors.

Parties and creditors.

• Four categories of Plan Creditors were identified: (i) RCF lenders (secured over aircraft and engines); (ii) operating lessors (24 aircraft); (iii) connected party creditors (including related parties and joint venture / service agreements); and (iv) trade creditors with claims over £50,000. Certain other creditors were excluded for practical or commercial reasons and a number of creditors had entered bilateral support agreements outside the Plan.

Relief sought.

The company sought an order under s.901C(1) summoning separate class meetings, directions as to notice and conduct (including holding virtual meetings), and ancillary orders including recognition of the company’s appointment of a foreign representative for US Chapter 15 and a confidentiality/notice direction under CPR 5.4D(2).

Issues framed by the court.

1. Whether the jurisdiction under Part 26A was engaged by satisfaction of s.901A Conditions A and B;
2. Whether notice to the Trade Plan Creditors complied with the Practice Statement and was adequate;
3. How classes should be constituted under established Part 26 principles;
4. Whether the English court had international jurisdiction (addressing the Recast Judgments Regulation and Article 8); and
5. Practical directions for conducting meetings including the use of a virtual meeting and ancillary orders (foreign representative declaration and CPR 5.4D(2) notice).

Court’s reasoning and conclusions.

The court found compelling evidence that the company had immediate and serious financial difficulties and that the Restructuring Plan was proposed for the purpose of mitigating those difficulties, so s.901A Conditions A and B were satisfied. The Practice Statement requires the applicant to draw attention to issues going to constitution, jurisdiction and threshold conditions at the convening hearing; the judge held that the company had taken reasonable steps to notify Trade Plan Creditors (letter of 14 July with an addendum and a recorded webinar) and that a 21‑day notice period to the meetings was sufficient in the urgent circumstances.

Applying the long‑established Part 26 approach to class constitution (creditors whose legal rights are not so dissimilar as to make consultation with a view to common interest impossible), the judge directed that the RCF creditors, the operating lessors, the connected party creditors and the trade creditors each constitute separate classes. The judge considered the cross‑class cram down provisions in s.901G but declined to decide any cram down issues at the convening stage.

On international jurisdiction the judge proceeded on the assumption that the Recast Judgments Regulation applied and held Article 8 provided a basis for jurisdiction as sufficient scheme creditors in each class were domiciled in England. The court approved conducting the meetings virtually given the circumstances, made a declaration as to the company’s Chapter 15 foreign representative, and ordered that the company be notified of any application to inspect court documents under CPR 5.4D(2).

Practical outcome. The court ordered convening of the Plan creditor meetings, with directions as discussed and a proposed virtual meeting on 25 August 2020, leaving merits and fairness of the Plan to the sanction stage.

The court granted the application to convene meetings under s.901C(1) and made directions for the convening and conduct of those meetings (including authorisation of virtual meetings to be held on 25 August 2020). Rationale: the judge was satisfied that Condition A and Condition B in s.901A were met, notice to Trade Plan Creditors complied with the Practice Statement given the urgency, the proposed four classes of creditors were properly constituted applying Part 26 principles, Article 8 of the Recast Judgments Regulation provided a sufficient basis for jurisdiction, and ancillary orders (declaration of foreign representative and CPR 5.4D(2) notice) were appropriate. Matters going to the fairness of the Restructuring Plan were reserved for the sanction hearing.