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Kirkland advises Civil Aviation Authority on first UK restructuring plan

Kirkland & Ellis is advising the UK Civil Aviation Authority on the restructuring of Virgin Atlantic Airways, in the first restructuring plan to be launched under the new Part 26A of the Companies Act 2006.

Virgin Atlantic’s plan represents a major first test of the new restructuring plan procedure, recently introduced under the Corporate Insolvency and Governance Act 2020 (effective from 26 June). The new plan offers the possibility of cross-class cram-down, to impose a restructuring on dissenting stakeholders, and the possibility of compromising operational as well as financial creditors. For analysis of the reforms, see our Alert deck.

Virgin Atlantic Airways Limited launched its restructuring plan on 14 July, with the backing of key financial stakeholders. The deal seeks to ensure the survival of the airline against the backdrop of the existential crisis in the travel industry, owing to COVID-19 and related restrictions.

The comprehensive, solvent recapitalisation deal involves a significant shareholder support package (including £200m in cash and the deferral of £400m of fees), £170m third party secured debt financing, and creditor support (including deferrals and advances from payments companies and aircraft lessors), together worth up to £1.2bn over 18 months.

The court convening hearing is scheduled for 28 July, with stakeholder meetings and the court sanction hearing scheduled to follow in the week commencing 17 August. Recognition of the plan will be sought under Chapter 15 of the U.S. Bankruptcy Code.

Crucially, the restructuring allows Virgin Atlantic’s planes to continue in operation. If successful, the deal will serve as important template for restructurings under the new procedure.

The Kirkland team was led by London restructuring partner Elaine Nolan with restructuring associate Kai Zeng.

Kirkland advises Travelodge and AllSaints on restructurings

Kirkland & Ellis is advising Travelodge, the UK’s largest independent hotel brand, on its company voluntary arrangement (CVA), which was approved by creditors on 19 June. The CVA involves Travelodge temporarily reducing rents and moving from quarterly to monthly payments on certain leases. Unlike most CVAs, there are no proposed hotel closures or permanent rent reductions.

The approval of Travelodge’s CVA follows the ground-breaking injunction to restrain a winding-up petition pending Travelodge’s restructuring and forthcoming legislation.

The successful vote will enable Travelodge to navigate the short-term challenges facing the business as a result of the COVID-19 pandemic. The process is now complete, subject to the usual challenge period.

Kirkland is also advising AllSaints, the global contemporary fashion brand, on the restructuring of its store portfolio through parallel CVAs of two English tenant companies. AllSaints successfully obtained recognition in the U.S. and Canada of one of the CVAs, which (if approved by creditors) will compromise the relevant company’s liabilities under leases in the U.S. and Canada. Recognition was obtained under Chapter 15 of the U.S. Bankruptcy Code and the Canadian equivalent (Part IV of the Companies’ Creditors Arrangement Act), on 17 June. If, and when, creditors approve the CVAs, follow-up recognition applications will be made to the U.S. and Canadian courts.

We believe AllSaints’ CVA represents a series of major firsts, including the first U.S. recognition of a landlord CVA, the first Canadian recognition of a CVA, and (if approved by creditors) the first compromise of U.S. and Canadian leases via a CVA.

The Kirkland team for Travelodge was led by restructuring partners Elaine Nolan and Kon Asimacopoulos and litigation partner Richard Boynton. Ian Wormleighton and Dan Butters, of Deloitte LLP, are the CVA supervisors. Tom Smith QC and Henry Phillips, barristers at 3-4 South Square, advised Travelodge on its CVA.

The Kirkland team for AllSaints was led by restructuring partners Elaine Nolan and Lisa Stevens in London, Joshua Sussberg and Neil Herman in New York, and David Seligman in Chicago. Richard Fleming and Mark Firmin, of Alvarez and Marsal, are the CVA nominees.