Virgin Atlantic's Heathrow Slot Financing

This month, Virgin Atlantic completed a $745 million senior secured financing from funds managed by Apollo, secured on its take-off and landing slots at Heathrow.

A slot gives an airline the right to take off or land at a busy airport at a set time. Heathrow is so congested that slots rarely become available, and Air France reportedly sold a single slot to Oman Air for $75 million in 2016. Virgin used 27 of its 31 Heathrow slots as security. It said the money would pay down older debt and fund fleet upgrades, including refurbishing its Boeing 787s from 2028, new Airbus A330neos and Starlink wifi.

The deal is an example of private credit, where investment firms lend directly rather than through banks. Heathrow slots suit a lender because demand always exceeds supply, although a slot is closer to a permission than ordinary property, which makes taking security over it more complex. Virgin, owned 51% by Virgin Group and 49% by Delta, had used its slots before in 2015, raising £220 million through Europe's first slot-backed bond.

Private credit lenders are willing to lend against unusual assets, provided their value is reliable. Heathrow slots, which rarely come up for sale, meet that test.