Virgin Australia’s administrator has confirmed shareholders are unlikely to receive a cent under the deal for the airline agreed with Bain Capital.
Deloitte’s Richard Hughes also said creditors more broadly are unlikely to be repaid in full, a statement that will affect bondholders, staff owed entitlements and aircraft lessors.
The news is the first major announcement since Bain beat off Cyrus Capital Partners on Friday to become the preferred bidder for the airline. The deal will not be confirmed until a meeting of creditors on 22 August.
In a statement released to the ASX, Deloitte’s Richard Hughes said, “We do not expect there will be sufficient recoveries to repay creditors in full.
“We declare that we have reasonable grounds to believe that there is no likelihood that shareholders of VAH will receive any distribution for their shares.”
Shares last traded at 8.6 cents and around 90 per cent of the carrier was owned by foreign companies including Etihad Airways, Singapore Airlines, the Virgin Group and Chinese conglomerates Nanshan and HNA Group.
The biggest threat to the deal getting rubber-stamped appears to be from the bondholders, who, according to the AFR, are concerned they will on receive just 6.5¢ per dollar, or $130 million out of the $2 billion owed.
Days before the deal with Bain was announced, Virgin Australia’s bondholders broke cover and launched an attempt to wrestle control of the airline.
Sydney advisory Faraday Associates lodged the proposal with administrator Deloitte at 7am on Wednesday 24 June, which involved offering $800 million to recapitalise the business and $125 million to keep it alive during the administration process.
It is understood Faraday effectively wanted to stop the sale and shift it back until a better price could be achieved, post-pandemic.
The bid was linked with to Virgin Blue co-founder Rob Sherrard, who famously wrote up the initial concept of low cost carrier 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.