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Virgin bondholders in fresh attempt to seize control

written by Adam Thorn | July 6, 2020
Virgin Australia VH-YIT in storage at Adelaide Airport (Noah Pitkin) 3
Virgin Australia VH-YIT in storage at Adelaide Airport (Noah Pitkin)

Virgin Australia’s bondholders have made a fresh attempt to seize control of the airline from winning bidder Bain Capital by asking Australia’s takeover watchdog to intervene.

Broad Peak Investment Advisers and Tor Investment Management, representing the creditors, are seeking an interim order forcing Deloitte to release the terms of the deal and allow their own offer to be put to creditors ahead of a vote in August.

Last week, Australian Aviation reported that shareholders are unlikely to receive a cent under the Bain deal while other creditors, including bondholders, are also unlikely to be repaid in full.

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A statement released by the Australian government Takeovers Panel on Monday morning said bondholders considered “certain circumstances” of the administration process to be “unacceptable” and stopped them presenting their vision for the reborn airline to credits.

“The panel makes no comment on the merits of the application,” the statement read.

Deloitte quickly defended the claim, which it said was “without merit”.

“They will present information to the panel as required to refute all claims made by the applicants,” Deloitte said.

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“The administrators have undertaken a process which has resulted in a sale to Bain Capital, and which provides certainty for the future of the airline.”

The news comes after Virgin’s administrator played down the chances of creditors receiving their money back last week.

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.”

According to The Australian Financial Review, bondholders were concerned they will 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 Virgin Blue co-founder Rob Sherrard, who famously wrote up the initial concept of the 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.

3 Comments

  • Greg

    says:

    I understand the bondholders have all the right in the world to plead their case and try to recover their owed monies, but in the process they’re risking thousands and thousands of jobs (if Bain pulls out and the bond holders can’t support the company). I know zilch about the administration process but why wouldn’t the bondholders try to strike a positive relationship with Bain so in the long run when the airline returns to profitability they can be re-paid rather than starting an ugly legal battle with Bain.

  • Anton

    says:

    If this takeover deal with Bain Capital isn’t successful, Virgin Australia will be liquidated and this will signal the end of the second largest carrier in Australia as we all know it.

  • Michael

    says:

    Greg, ‘return to profitability’, is literally pie in the sky thinking.
    Bain hasn’t signed final papers yet, so much could happen between now, & 22 August.

Leave a Comment

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

Virgin bondholders in fresh attempt to seize control

written by Adam Thorn | July 6, 2020
Virgin Australia VH-YIT in storage at Adelaide Airport (Noah Pitkin) 3
Virgin Australia VH-YIT in storage at Adelaide Airport (Noah Pitkin)

Virgin Australia’s bondholders have made a fresh attempt to seize control of the airline from winning bidder Bain Capital by asking Australia’s takeover watchdog to intervene.

Broad Peak Investment Advisers and Tor Investment Management, representing the creditors, are seeking an interim order forcing Deloitte to release the terms of the deal and allow their own offer to be put to creditors ahead of a vote in August.

Last week, Australian Aviation reported that shareholders are unlikely to receive a cent under the Bain deal while other creditors, including bondholders, are also unlikely to be repaid in full.

Advertisement
Advertisement

A statement released by the Australian government Takeovers Panel on Monday morning said bondholders considered “certain circumstances” of the administration process to be “unacceptable” and stopped them presenting their vision for the reborn airline to credits.

“The panel makes no comment on the merits of the application,” the statement read.

Deloitte quickly defended the claim, which it said was “without merit”.

“They will present information to the panel as required to refute all claims made by the applicants,” Deloitte said.

PROMOTED CONTENT

“The administrators have undertaken a process which has resulted in a sale to Bain Capital, and which provides certainty for the future of the airline.”

The news comes after Virgin’s administrator played down the chances of creditors receiving their money back last week.

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.”

According to The Australian Financial Review, bondholders were concerned they will 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 Virgin Blue co-founder Rob Sherrard, who famously wrote up the initial concept of the 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.

3 Comments

  • Greg

    says:

    I understand the bondholders have all the right in the world to plead their case and try to recover their owed monies, but in the process they’re risking thousands and thousands of jobs (if Bain pulls out and the bond holders can’t support the company). I know zilch about the administration process but why wouldn’t the bondholders try to strike a positive relationship with Bain so in the long run when the airline returns to profitability they can be re-paid rather than starting an ugly legal battle with Bain.

  • Anton

    says:

    If this takeover deal with Bain Capital isn’t successful, Virgin Australia will be liquidated and this will signal the end of the second largest carrier in Australia as we all know it.

  • Michael

    says:

    Greg, ‘return to profitability’, is literally pie in the sky thinking.
    Bain hasn’t signed final papers yet, so much could happen between now, & 22 August.

Leave a Comment

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

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