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Bondholders break cover to launch Virgin coup

written by Adam Thorn | June 24, 2020
Virgin Australia grounded due to COVID-19 (VH-YIT) Aidan Pullino
A grounded Virgin Australia 737-8FE, VH-YIT, in Adelaide (Aidan Pullino)

Virgin Australia’s bondholders have broken cover to launch their sensational attempt to wrestle control of the airline from the two remaining bidders.

Sydney advisory Faraday Associates lodged the proposal with administrator Deloitte at 7am on Wednesday, which will involve offering $800 million to recapitalise the business and $125 million to keep it alive during the administration process.

The public reveal, which came far earlier than anticipated, landed just days after the bidding process officially ended at 10am on Monday, with remaining US investors Bain Capital and Cyrus Capital Investment submitting their final offers.

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Faraday Associates, which is representing bondholders, said in a statement, “Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline.

“This approach offers the fastest pathway to return Virgin to the new operating environment for Australian aviation and positions the airline to resume high-quality services to its millions of loyal Australian customers.”

The move was sparked by fears that, should Bain or Cyrus win, unsecured bondholders would be wiped out.

Deloitte is due to pick the winning bidder next week and put that proposal to creditors later in August.

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It is understood Faraday effectively want to stop the sale and shift it back until a better price could be achieved, post-pandemic.

The AFR further claimed this would mean converting bondholders into shareholders of now hibernated Virgin Australia Holdings, which would be recapitalised and relisted on the ASX with a $1.4 billion market capitalisation.

The group would then inject nearly $1 billion of funds into the airline to keep it going until the pandemic, and its effects, end.

The move would deliver Virgin bondholders and other unsecured creditors nearly 70 cents on the dollar.

On Monday, Australian Aviation first reported that Virgin Blue co-founder Rob Sherrard was linked with the bondholders’ 11th-hour attempt to wrestle back control.

Sherrard famously wrote up the initial concept of Virgin Blue with Brett Godfrey on the back of a beer mat in a London pub. The pair were surprised that Australian airfares were so much higher than equivalent routes in Europe.

A report in The Australian Financial Review suggested the group had been “secretly working for weeks” on a plan to launch their own bid.

Overall, there are 6,000 retail investors who have money tied in Virgin’s bonds, and $2.1 billion of the business’ $7.1 billion of debt is allocated to bondholders.

Hours later, both the TWU and Virgin’s administrator rebuffed the bondholders move.

The union’s national secretary, Michael Kaine, called the move “unsettling”, while a statement released by Deloitte hours after the final deadline passed pointedly made no mention of a third bid.

Fly into Spring with Australian Aviation’s latest print edition. Starting from $49.95 a year, you can read comprehensive coverage on all sectors of the industry to keep you in the loop. Get your hands on the subscription today. Subscribe now at australianaviation.com.au.

7 Comments

  • Jack Chomlez

    says:

    Deloitte will do their best to squash it, this whole deal will be about the money they can rake out of the situation?

  • LC KoolG

    says:

    Private Equity has a poor track record globally of doing anything other than devouring the entire carcass of a dying business.
    If you know how flock of vultures or a pack of the species, the wild African painted dog, functions and survived then you too can be successful that industry segment.

  • Lucas

    says:

    Why would they wait to the 11th hour, to do this? Makes no sense…

  • Stu Bee

    says:

    Compass Mk3 perhaps?

  • Lee

    says:

    “reveal” is not a noun. You mean “relevation”

    • Lee

      says:

      Sorry, “revelation”.

  • Ebenezer

    says:

    Between now, & August, anything could happen, as much can change dramatically in that time.
    It’s now just a waiting game.
    My thoughts are with the staff, because no matter the outcome, some will be jobless, unfortunately.

Leave a Comment

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

Bondholders break cover to launch Virgin coup

written by Adam Thorn | June 24, 2020
Virgin Australia grounded due to COVID-19 (VH-YIT) Aidan Pullino
A grounded Virgin Australia 737-8FE, VH-YIT, in Adelaide (Aidan Pullino)

Virgin Australia’s bondholders have broken cover to launch their sensational attempt to wrestle control of the airline from the two remaining bidders.

Sydney advisory Faraday Associates lodged the proposal with administrator Deloitte at 7am on Wednesday, which will involve offering $800 million to recapitalise the business and $125 million to keep it alive during the administration process.

The public reveal, which came far earlier than anticipated, landed just days after the bidding process officially ended at 10am on Monday, with remaining US investors Bain Capital and Cyrus Capital Investment submitting their final offers.

Advertisement
Advertisement

Faraday Associates, which is representing bondholders, said in a statement, “Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline.

“This approach offers the fastest pathway to return Virgin to the new operating environment for Australian aviation and positions the airline to resume high-quality services to its millions of loyal Australian customers.”

The move was sparked by fears that, should Bain or Cyrus win, unsecured bondholders would be wiped out.

Deloitte is due to pick the winning bidder next week and put that proposal to creditors later in August.

PROMOTED CONTENT

It is understood Faraday effectively want to stop the sale and shift it back until a better price could be achieved, post-pandemic.

The AFR further claimed this would mean converting bondholders into shareholders of now hibernated Virgin Australia Holdings, which would be recapitalised and relisted on the ASX with a $1.4 billion market capitalisation.

The group would then inject nearly $1 billion of funds into the airline to keep it going until the pandemic, and its effects, end.

The move would deliver Virgin bondholders and other unsecured creditors nearly 70 cents on the dollar.

On Monday, Australian Aviation first reported that Virgin Blue co-founder Rob Sherrard was linked with the bondholders’ 11th-hour attempt to wrestle back control.

Sherrard famously wrote up the initial concept of Virgin Blue with Brett Godfrey on the back of a beer mat in a London pub. The pair were surprised that Australian airfares were so much higher than equivalent routes in Europe.

A report in The Australian Financial Review suggested the group had been “secretly working for weeks” on a plan to launch their own bid.

Overall, there are 6,000 retail investors who have money tied in Virgin’s bonds, and $2.1 billion of the business’ $7.1 billion of debt is allocated to bondholders.

Hours later, both the TWU and Virgin’s administrator rebuffed the bondholders move.

The union’s national secretary, Michael Kaine, called the move “unsettling”, while a statement released by Deloitte hours after the final deadline passed pointedly made no mention of a third bid.

Fly into Spring with Australian Aviation’s latest print edition. Starting from $49.95 a year, you can read comprehensive coverage on all sectors of the industry to keep you in the loop. Get your hands on the subscription today. Subscribe now at australianaviation.com.au.

7 Comments

  • Jack Chomlez

    says:

    Deloitte will do their best to squash it, this whole deal will be about the money they can rake out of the situation?

  • LC KoolG

    says:

    Private Equity has a poor track record globally of doing anything other than devouring the entire carcass of a dying business.
    If you know how flock of vultures or a pack of the species, the wild African painted dog, functions and survived then you too can be successful that industry segment.

  • Lucas

    says:

    Why would they wait to the 11th hour, to do this? Makes no sense…

  • Stu Bee

    says:

    Compass Mk3 perhaps?

  • Lee

    says:

    “reveal” is not a noun. You mean “relevation”

    • Lee

      says:

      Sorry, “revelation”.

  • Ebenezer

    says:

    Between now, & August, anything could happen, as much can change dramatically in that time.
    It’s now just a waiting game.
    My thoughts are with the staff, because no matter the outcome, some will be jobless, unfortunately.

Leave a Comment

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

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