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Bain and Cyrus make Virgin final two

written by Adam Thorn | June 2, 2020
Virgin Australia Boeing 737-800
A Virgin Australia Boeing 737-800 departs Brisbane Airport in 2019 (Craig Murray)

Virgin Australia’s administrator announced late on Tuesday afternoon that he’s whittled down the four prospective bidders to two: Bain Capital and Cyrus Capital Partners.

Deloitte’s Vaughan Strawbridge said both parties “are well-funded, have deep aviation experience, and see real value in the business and its future”.

The decision means that private equity firm BGH Capital and US aviation company Indigo Partners have been knocked out, ahead of a 30 June deadline for a binding agreement to be reached.

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Cyrus Capital is the bidder most closely linked to Sir Richard Branson, and Australian Aviation has previously reported speculation that it plans to maintain the business as a full-service international airline.

Cyrus is based in the US but has a presence in Europe. It led a consortium that owned the ill-fated Flybe, Europe’s biggest regional carrier that became the first major casualty of the coronavirus crisis.

Meanwhile, Bain Capital dramatically broke cover on 25 May to publicly declare it had the “strongest capital base of any of the bidders” and would be a “committed partner for Virgin Australia with a proven track record”.

Strawbridge said in a media statement, “Over the weekend through to today, we assessed the proposals received from shortlisted bidders and discussed their proposals with them to ensure a thorough and comprehensive assessment has been undertaken.

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“Five non-binding indicative proposals were received on Friday, and they have now been further short-listed to two preferred bidders.

“We will now spend the coming weeks facilitating in-depth bidder engagement with the stakeholders of the business and work closely with both preferred bidders in the lead up to binding final offers being received.

“The strong interest coming from all parties has generated the competitive tension we have sought that is important in a process such as this, and we are in a strong place when it comes to delivering the best possible commercial outcome for all creditors, and to see a strong and sustainable Virgin Australia emerge from this process. It is still the intention to have a binding agreement in place by 30 June, which remains unchanged.

“There will also be speculation that entities associated with the parties that have not moved into this next phase, as well as others, could become involved in some capacity with the remaining parties. That will, of course, be a matter for them.

Australian Aviation previously reported that the TWU met with the government’s Virgin representative, Nicholas Moore, and told him this week that attempts to sell the business are being impeded by lack of clarity over whether or not there will be federal help.

Unions representing the airline’s employees – who together account for 9,020 of the total number of creditors and are owed $451 million – told the media later that a lack of reassurance means serious bidders are “trying to crunch numbers in the dark”.

25% off starts now! Australian Aviation magazine Cyber Monday sale is now live. Have the very best of Australian Aviation’s annual print and digital subscription. This includes every In Focus and Behind the Lens digital magazine, special coverage, exclusive photos and editions you may have miss. Subscribe now at australianaviation.com.au.

28 Comments

  • G

    says:

    TWU is kidding themselves – “they don’t know if there will be any financial assistance”. It has been clear that the Federal Government has stated that they will not fund the sale of VA and let the market take its course. There’s still a very real risk that VA will go into liquidation as there is not enough cash to get them past the sale dates.

  • CBR Based Fan

    says:

    Hopefully Indigo Partners now launches a new Ultra Low Cost Carrier in Australia (Like Frontier Airlines or Wizz Air).

    • Chris

      says:

      They could take over the the Tigerair brand and compete directly with Jetstar.

  • Velocity and Refund

    says:

    Great new like hope that we can start seeing our refunds soon and velocity survivors without being devalued.

  • Paul

    says:

    Cyrus bid will end up with the same tired and boring airline. This airline needs to get rid of its past directors and inject fresh ideas. Cyrus means Branson will still be involved. Sad if they succeed

    • Russell

      says:

      both will have Branson involved

  • Rod Pickin

    says:

    The devil will be in the detail of course but at this stage I am not convinced that either parties chosen will be our countries savior.

    • James

      says:

      Agreed….

  • Peter K

    says:

    Fair bit of water to flow under the bridge yet.
    The first and most immediate issue is that bridging funds are urgently required as VA does not currently have sufficient funds to see it through the sales process.

    Then the next immediate issue relates to coming to agreement with certain of the lessors regarding the future fleet of VA before the expiry of the date when lessors can reclaim their aircraft under the Cape Town Convention (which is about 19 June) or the expiry of court approved protection of the Administrator regarding liability for lease payments for any fleet used (which is about 16 June) – do not quote me on exact dates – then thirdly the massive amount of money owing to secured creditors – all of which could bring the sale process undone – bearing in mind that no binding offers have yet been made and they must be submitted on or before 12 June. Then, assuming that bids are received and bridge funding received and arrangements are agreed with certain lessors regarding the fleet that the successful bidder wants to retain (and none of the above is guaranteed to happen) it must all go to a meeting of the creditors in August for approval.
    The wheels could very easily fall off in the interim.

    • Rod Pickin

      says:

      An excellent post Peter! and following on from that, since if and when the bid gets up doubtful it will be named VOZ again then as a new and foreign owned outfit will it be allowed to operated within and about Oz? will the current AOC be transferrable or a new and protracted application have to be made?, – the sheer add on costs of rebranding and clothing everything and everyone, inventory and the list goes on not forgetting the cost to the folk that make the operation work, it’s people. It doesn’t make me happy to say it but, them wheels aint gonna stay on for long.

      • Peter K

        says:

        If the airline entity is acquired, then the AOC automatically transfers (assuming new owners pass various requirements which in this case I see no reason why they wouldn’t.
        A new airline startup requires a new AOC. If they acquired an airline that already has jet fleet (A320 or B737) this would be a relatively quick process. The only one I can think of would be Tiger which has A320s, and assuming that administrator is able to sell it as a separate entity if acquirer of VA does not intend to acquire and use it. This could be a target for Indigo Partners who are a very well run outfit with controlling interests in various airlines – the most notable being WizzAir (EU) and Spirit (US).
        If Rex had aspirations in their own right (apart from say acquiring Tiger) it would take them about 9 to 12 months to put jets (A320 or B737) on their existing AOC. They do have any jet aircraft on their existing AOC.

      • Peter K

        says:

        If the airline entity is acquired, then the AOC automatically transfers (assuming new owners pass various requirements which in this case I see no reason why they wouldn’t.
        A new airline startup requires a new AOC. If they acquired an airline that already has jet fleet (A320 or B737) this would be a relatively quick process. The only one I can think of would be Tiger which has A320s, and assuming that administrator is able to sell it as a separate entity if acquirer of VA does not intend to acquire and use it. This could be a target for Indigo Partners who are a very well run outfit with controlling interests in various airlines – the most notable being WizzAir (EU) and Spirit (US).
        If Rex had aspirations in their own right (apart from say acquiring Tiger) it would take them about 9 to 12 months to put jets (A320 or B737) on their existing AOC. They do have any jet aircraft on their existing AOC.

        In the above I am assuming an operator of B737 or A320. Not F100s

  • Peter

    says:

    Couldn’t make a profit for 7 years & they want to keep the existing structure ???

    • Kim

      says:

      Under the previous Directorship and MD Borghetti, there was little chance of them making a profit. The A330’s are a prime example of waste and overpriced lease payments.

  • 14 Sep 2019 … This story from the Australian Aviation archives is from September … the biggest corporate write-off in New Zealand’s history, and a blame game that will go on for decades. … (Jim Thorn) … contract from Air Tours in the UK three months before the SURELY Mr Thorn, You’re Related To This Guy !

    • Adam Thorn

      says:

      Well spotted! I have spoken to the living legend that is Jim and we have joked about this. We don’t *believe* we’re related… but who knows? It’s a small world.

  • James

    says:

    I don’t. The employees don’t.

    That’s not going to save it. We have a different market to the USA. Ultra low cost isn’t the future.

    There needs to be a suitable option for the business traveller. ULC isn’t it

    • Chris

      says:

      The LCC/FSC hybrid model is the the answer, as it captures all markets from the budget to premium.

      • James

        says:

        Historically that doesn’t work in AUS. As one combined unit. 2 seperate business entities is still around. Theoretically, that’s exactly what Virgin/Tiger brands were. So what would be different?

  • Neil

    says:

    I am very concerned about the last two bidders standing.Cyrus have a very poor track record.Buying up airlines,then selling them off.Also leaving the Airline infastructure the way it is.
    The existing fleet,which is made up of Widebody,& smaller aircraft,as well as keeping non-profitable Overseas Routes.
    Virgin Australia has not made a profit in 7 years,& with Sir Richard Branson involved,and with their past partnerships with Cyrus selling off Virgin Atlantic to Alaska Airlines,I’d be worried.
    Secondly about Bains bid is a disaster!Cut back too much,running back to a budget airline and massive job losses,and Fleet cuts.I suspect selling off too many Aircraft unfortuntly isn’t going to make a good profit Return,as the second hand market for Jet Aircraft are not great.
    What happened to Team Australia!!Looks like the Airline will be past onto foreign ownership again,particularly the Americans.

    • Peter K

      says:

      Certainly will not make any profit selling off VA aircraft.
      Virgin Australia Airlines operated a fleet of 144 aircraft of which 142 were leased to approximately 73 lessors.
      The terms of the Cape Town Convention whereby there is a delay before lessors can retrieve their aircraft expires on or about 16 June. The new owner would need to have sorted out its fleet requirements and come to an arrangement with certain lessors before this date.

      And Administrator’s ‘no liability’ for use of leased aircraft (under AU court awarded decision) will cease at about this time. And they will not expose themselves.

      Otherwise the fleet may evaporate. It is fortunate for VA (in regards to this particular aspect) that with COVID 19 impact, there is currently no market to re-lease these aircraft.

  • TD

    says:

    Where are the Australian bidders? In the words of a famous Australian……”tell them they’re dreaming”

    • James

      says:

      They don’t have money. And they don’t want the airline.

      That’s where they are.

  • Jake

    says:

    Theres a sucker born every minute! And in this case, Two!
    As to why any of them (Indigo) are not starting there own business here is beyond me…. take it to the cash strapped airline without the debt!

  • Colin Campbell

    says:

    Just to lighten it up a tad, I am sure that the Virgin 737 is LANDING at YBBN RWY19!

    • Craigy

      says:

      If not, its an interesting attitude for a departing passenger jet!

      In other news, another Qantas B744 (OEI) has left Australia for the Mojave Desert. That leaves just three now.

  • Anton

    says:

    I am hoping that Virgin Australia will get out of administration sooner. If any of the bidders don’t get rid of leased aircraft, or sell the assess off, then they will be at risk of being seized by the lessors.

  • Jabiru Joe

    says:

    Better still, have an all Australian company do a start up and retain the profit base, tax benefits and expertise here in Australia. We have far too much foreign ownership of our industries in general.

Leave a Comment

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Bain and Cyrus make Virgin final two

written by Adam Thorn | June 2, 2020
Virgin Australia Boeing 737-800
A Virgin Australia Boeing 737-800 departs Brisbane Airport in 2019 (Craig Murray)

Virgin Australia’s administrator announced late on Tuesday afternoon that he’s whittled down the four prospective bidders to two: Bain Capital and Cyrus Capital Partners.

Deloitte’s Vaughan Strawbridge said both parties “are well-funded, have deep aviation experience, and see real value in the business and its future”.

The decision means that private equity firm BGH Capital and US aviation company Indigo Partners have been knocked out, ahead of a 30 June deadline for a binding agreement to be reached.

Advertisement
Advertisement

Cyrus Capital is the bidder most closely linked to Sir Richard Branson, and Australian Aviation has previously reported speculation that it plans to maintain the business as a full-service international airline.

Cyrus is based in the US but has a presence in Europe. It led a consortium that owned the ill-fated Flybe, Europe’s biggest regional carrier that became the first major casualty of the coronavirus crisis.

Meanwhile, Bain Capital dramatically broke cover on 25 May to publicly declare it had the “strongest capital base of any of the bidders” and would be a “committed partner for Virgin Australia with a proven track record”.

Strawbridge said in a media statement, “Over the weekend through to today, we assessed the proposals received from shortlisted bidders and discussed their proposals with them to ensure a thorough and comprehensive assessment has been undertaken.

PROMOTED CONTENT

“Five non-binding indicative proposals were received on Friday, and they have now been further short-listed to two preferred bidders.

“We will now spend the coming weeks facilitating in-depth bidder engagement with the stakeholders of the business and work closely with both preferred bidders in the lead up to binding final offers being received.

“The strong interest coming from all parties has generated the competitive tension we have sought that is important in a process such as this, and we are in a strong place when it comes to delivering the best possible commercial outcome for all creditors, and to see a strong and sustainable Virgin Australia emerge from this process. It is still the intention to have a binding agreement in place by 30 June, which remains unchanged.

“There will also be speculation that entities associated with the parties that have not moved into this next phase, as well as others, could become involved in some capacity with the remaining parties. That will, of course, be a matter for them.

Australian Aviation previously reported that the TWU met with the government’s Virgin representative, Nicholas Moore, and told him this week that attempts to sell the business are being impeded by lack of clarity over whether or not there will be federal help.

Unions representing the airline’s employees – who together account for 9,020 of the total number of creditors and are owed $451 million – told the media later that a lack of reassurance means serious bidders are “trying to crunch numbers in the dark”.

25% off starts now! Australian Aviation magazine Cyber Monday sale is now live. Have the very best of Australian Aviation’s annual print and digital subscription. This includes every In Focus and Behind the Lens digital magazine, special coverage, exclusive photos and editions you may have miss. Subscribe now at australianaviation.com.au.

28 Comments

  • G

    says:

    TWU is kidding themselves – “they don’t know if there will be any financial assistance”. It has been clear that the Federal Government has stated that they will not fund the sale of VA and let the market take its course. There’s still a very real risk that VA will go into liquidation as there is not enough cash to get them past the sale dates.

  • CBR Based Fan

    says:

    Hopefully Indigo Partners now launches a new Ultra Low Cost Carrier in Australia (Like Frontier Airlines or Wizz Air).

    • Chris

      says:

      They could take over the the Tigerair brand and compete directly with Jetstar.

  • Velocity and Refund

    says:

    Great new like hope that we can start seeing our refunds soon and velocity survivors without being devalued.

  • Paul

    says:

    Cyrus bid will end up with the same tired and boring airline. This airline needs to get rid of its past directors and inject fresh ideas. Cyrus means Branson will still be involved. Sad if they succeed

    • Russell

      says:

      both will have Branson involved

  • Rod Pickin

    says:

    The devil will be in the detail of course but at this stage I am not convinced that either parties chosen will be our countries savior.

    • James

      says:

      Agreed….

  • Peter K

    says:

    Fair bit of water to flow under the bridge yet.
    The first and most immediate issue is that bridging funds are urgently required as VA does not currently have sufficient funds to see it through the sales process.

    Then the next immediate issue relates to coming to agreement with certain of the lessors regarding the future fleet of VA before the expiry of the date when lessors can reclaim their aircraft under the Cape Town Convention (which is about 19 June) or the expiry of court approved protection of the Administrator regarding liability for lease payments for any fleet used (which is about 16 June) – do not quote me on exact dates – then thirdly the massive amount of money owing to secured creditors – all of which could bring the sale process undone – bearing in mind that no binding offers have yet been made and they must be submitted on or before 12 June. Then, assuming that bids are received and bridge funding received and arrangements are agreed with certain lessors regarding the fleet that the successful bidder wants to retain (and none of the above is guaranteed to happen) it must all go to a meeting of the creditors in August for approval.
    The wheels could very easily fall off in the interim.

    • Rod Pickin

      says:

      An excellent post Peter! and following on from that, since if and when the bid gets up doubtful it will be named VOZ again then as a new and foreign owned outfit will it be allowed to operated within and about Oz? will the current AOC be transferrable or a new and protracted application have to be made?, – the sheer add on costs of rebranding and clothing everything and everyone, inventory and the list goes on not forgetting the cost to the folk that make the operation work, it’s people. It doesn’t make me happy to say it but, them wheels aint gonna stay on for long.

      • Peter K

        says:

        If the airline entity is acquired, then the AOC automatically transfers (assuming new owners pass various requirements which in this case I see no reason why they wouldn’t.
        A new airline startup requires a new AOC. If they acquired an airline that already has jet fleet (A320 or B737) this would be a relatively quick process. The only one I can think of would be Tiger which has A320s, and assuming that administrator is able to sell it as a separate entity if acquirer of VA does not intend to acquire and use it. This could be a target for Indigo Partners who are a very well run outfit with controlling interests in various airlines – the most notable being WizzAir (EU) and Spirit (US).
        If Rex had aspirations in their own right (apart from say acquiring Tiger) it would take them about 9 to 12 months to put jets (A320 or B737) on their existing AOC. They do have any jet aircraft on their existing AOC.

      • Peter K

        says:

        If the airline entity is acquired, then the AOC automatically transfers (assuming new owners pass various requirements which in this case I see no reason why they wouldn’t.
        A new airline startup requires a new AOC. If they acquired an airline that already has jet fleet (A320 or B737) this would be a relatively quick process. The only one I can think of would be Tiger which has A320s, and assuming that administrator is able to sell it as a separate entity if acquirer of VA does not intend to acquire and use it. This could be a target for Indigo Partners who are a very well run outfit with controlling interests in various airlines – the most notable being WizzAir (EU) and Spirit (US).
        If Rex had aspirations in their own right (apart from say acquiring Tiger) it would take them about 9 to 12 months to put jets (A320 or B737) on their existing AOC. They do have any jet aircraft on their existing AOC.

        In the above I am assuming an operator of B737 or A320. Not F100s

  • Peter

    says:

    Couldn’t make a profit for 7 years & they want to keep the existing structure ???

    • Kim

      says:

      Under the previous Directorship and MD Borghetti, there was little chance of them making a profit. The A330’s are a prime example of waste and overpriced lease payments.

  • 14 Sep 2019 … This story from the Australian Aviation archives is from September … the biggest corporate write-off in New Zealand’s history, and a blame game that will go on for decades. … (Jim Thorn) … contract from Air Tours in the UK three months before the SURELY Mr Thorn, You’re Related To This Guy !

    • Adam Thorn

      says:

      Well spotted! I have spoken to the living legend that is Jim and we have joked about this. We don’t *believe* we’re related… but who knows? It’s a small world.

  • James

    says:

    I don’t. The employees don’t.

    That’s not going to save it. We have a different market to the USA. Ultra low cost isn’t the future.

    There needs to be a suitable option for the business traveller. ULC isn’t it

    • Chris

      says:

      The LCC/FSC hybrid model is the the answer, as it captures all markets from the budget to premium.

      • James

        says:

        Historically that doesn’t work in AUS. As one combined unit. 2 seperate business entities is still around. Theoretically, that’s exactly what Virgin/Tiger brands were. So what would be different?

  • Neil

    says:

    I am very concerned about the last two bidders standing.Cyrus have a very poor track record.Buying up airlines,then selling them off.Also leaving the Airline infastructure the way it is.
    The existing fleet,which is made up of Widebody,& smaller aircraft,as well as keeping non-profitable Overseas Routes.
    Virgin Australia has not made a profit in 7 years,& with Sir Richard Branson involved,and with their past partnerships with Cyrus selling off Virgin Atlantic to Alaska Airlines,I’d be worried.
    Secondly about Bains bid is a disaster!Cut back too much,running back to a budget airline and massive job losses,and Fleet cuts.I suspect selling off too many Aircraft unfortuntly isn’t going to make a good profit Return,as the second hand market for Jet Aircraft are not great.
    What happened to Team Australia!!Looks like the Airline will be past onto foreign ownership again,particularly the Americans.

    • Peter K

      says:

      Certainly will not make any profit selling off VA aircraft.
      Virgin Australia Airlines operated a fleet of 144 aircraft of which 142 were leased to approximately 73 lessors.
      The terms of the Cape Town Convention whereby there is a delay before lessors can retrieve their aircraft expires on or about 16 June. The new owner would need to have sorted out its fleet requirements and come to an arrangement with certain lessors before this date.

      And Administrator’s ‘no liability’ for use of leased aircraft (under AU court awarded decision) will cease at about this time. And they will not expose themselves.

      Otherwise the fleet may evaporate. It is fortunate for VA (in regards to this particular aspect) that with COVID 19 impact, there is currently no market to re-lease these aircraft.

  • TD

    says:

    Where are the Australian bidders? In the words of a famous Australian……”tell them they’re dreaming”

    • James

      says:

      They don’t have money. And they don’t want the airline.

      That’s where they are.

  • Jake

    says:

    Theres a sucker born every minute! And in this case, Two!
    As to why any of them (Indigo) are not starting there own business here is beyond me…. take it to the cash strapped airline without the debt!

  • Colin Campbell

    says:

    Just to lighten it up a tad, I am sure that the Virgin 737 is LANDING at YBBN RWY19!

    • Craigy

      says:

      If not, its an interesting attitude for a departing passenger jet!

      In other news, another Qantas B744 (OEI) has left Australia for the Mojave Desert. That leaves just three now.

  • Anton

    says:

    I am hoping that Virgin Australia will get out of administration sooner. If any of the bidders don’t get rid of leased aircraft, or sell the assess off, then they will be at risk of being seized by the lessors.

  • Jabiru Joe

    says:

    Better still, have an all Australian company do a start up and retain the profit base, tax benefits and expertise here in Australia. We have far too much foreign ownership of our industries in general.

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Your email address will not be published. Required fields are marked *

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