• Tom Jordan

Bondholders may derail sale of Virgin Australia

A Virgin Australia Boeing 737-800 departing from Auckland. Photo by Ernest Leung | AeroNewsX

Despite administrators reaching an agreement on the airline's sale to U.S firm Bain Capital, Virgin Australia's largest bondholders have today launched a campaign of their own to stop the sale and allow the airline's creditors to cast a vote on their preferred future for the stricken business.

Virgin Australia entered voluntary administration on April 21st 2020, having endured seven years of straight losses. The COVID-19 crisis proved to be the last straw for the company and Australian administrator Deloitte was brought in to rescue the business. From the very start of the process, there was significant interest from various airlines such as Singapore Airlines and Indigo Partners in purchasing the airline, as well as Australian business magnates such as Andrew "Twiggy" Forrest. However, in the end Deloitte narrowed interest down to two US owned investment firms; Cyrus Capital Partners and Bain Capital. On the 26th June 2020, it was announced to the Australian media that Cyrus had pulled out of the bidding process and Bain Capital would enter into a sale and implementation deed to purchase Virgin Australia.

But the story does not end here, following a recent announcement by Virgin Australia's bondholders Broad Peak Investment Advisors (majority owner of Singapore Airlines) and Tok Investment Management (a Hong Kong based corporation) that an application had been made to the Australian Government's Takeover Panel for an intervention in the airlines takeover by Bain Capital. This includes conditions that bondholders describe as "unacceptable". The bondholders have also called for a second vote to decide on the airlines future at the next creditors meeting in August, most likely to attempt to recoup some of the A$6.8 billion which is owed to the creditors of the airline. This is due to concerns that when the sale to Bain Capital is secured, these firms may never see the full debt recovery which they are owed, with predictions showing they may receive as little as 6.5 to 10 cents per dollar of debts owed by the airline to creditors.

The Australian Government's Takeover Panel has yet to make an official statement on whether they will accept the bondholders' rejection of the takeover application, stating only that they would "make no comment on the merits of the application." However, Virgin Australia's administrator Deloitte was quick to state that they believed the bondholders action was "without merit" and they would work to "refute all claims made by the applicant" which they described as trying to destabilise the sale process which "provides certainty for the future of the airline."

The Australian Transport Workers Union (TWU) representing all of the airline's ground staff was also quick to respond to the application by bondholders with disappointment, stating "workers don't want the process destabilised by moves which are not in the airline's best interests." The final decision of the outcome for the airline's sale is due at the August creditors meeting, at which investors are hoping to cast a final vote on the airline's future and recuperation of debts owed to them by the airline.

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