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Virgin Australia Lowered To 'D' On Payment Moratorium And Chapter 15 Filing

  • Virgin Australia Holdings Ltd.'s administrators have placed a moratorium on all creditor payments, including payments on the airline's debt. As a result, we consider that default is a virtual certainty on Virgin's next coupon payment for its US$425 million senior unsecured 2024 bond on May 15, 2020.
  • On April 29, 2020, the company and certain affiliates filed petitions pursuant to Chapter 15 of the Bankruptcy Code in the U.S. with regard to the company's voluntary administration proceedings in Australia.
  • We consider that the moratorium on creditor payments and the airline's bankruptcy petition constitute a default under our criteria.
  • On May 1, 2020, S&P Global Ratings lowered its issuer credit rating on Virgin Australia to 'D' from 'CC', and lowered its related issue ratings on the airline's unsecured debt to 'D' from 'C'.
MELBOURNE (S&P Global Ratings) May 1, 2020—S&P Global Ratings today took the rating actions listed above.
We lowered the ratings on Virgin Australia to 'D' to reflect the moratorium on all creditor payments while the company is in voluntary administration. The airline's administrators have announced that the company will not pay its next coupon payment on its US$425 million senior unsecured notes on May 15, 2020, due to a moratorium on all creditor payments. Following the first creditor meeting on April 30, 2020, the company's administrators are seeking to schedule the next creditor meeting for August 22, 2020, with no creditor payments expected to be made during the intervening period.
We consider the payment moratorium to represent a default under our criteria. During the administration process, the company will explore options to recapitalize the business, or otherwise, realize value from the company's asset base to maximize returns to creditors. We expect that unsecured lenders will be forced to accept less value for amounts owing under the terms of the existing unsecured debt facilities as part of the anticipated debt restructuring and recapitalization process.
The 'D' ratings also reflect the company's filing of a Chapter 15 bankruptcy petition. On April 29, 2020, the company and certain affiliates filed petitions pursuant to Chapter 15 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York with regard to the company's voluntary administration proceedings in Australia, under supervision of the Federal Court of Australia.
The company's administrators filed for Chapter 15 to protect ongoing global operations, and to ensure fairness to all creditors and stakeholders, wherever located, by preventing commencement of competing proceedings in other jurisdictions.
The ratings are expected to remain at 'D' until the recapitalization process is complete and the outstanding senior unsecured notes have been restructured.
Virgin Australia's credit quality has deteriorated following intensifying pressure on the airline's cash outflow and liquidity due to government-led COVID-19-related restrictions.

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