Virgin Australia’s administrator has told creditors it won’t be accepting a rival bid from bondholders – despite a Federal Court judge insisting the group can put their alternative proposal to a vote.
Deloitte made the declaration in a letter sent on Friday, which also confirmed that ‘winning’ bidder Bain has already pumped $125 million into the business to keep it trading.
Bain beat out Cyrus Capital Partners last month to become the preferred bidder for the airline, yet bondholders have vowed to fight on and put a rival bid forward so they can recoup more of their $2 billion investment.
On Friday, Deloitte’s Vaughan Strawbridge sent a memo to creditors, seen by Australian Aviation, which outlined how the sale was progressing.
It confirmed that, on 24 June, the business received what it called a “back-up recapitalisation proposal” from bondholders, represented by Broad Peak Investment Advisers and Tor Investment Management.
However, it said it was unable to accept “any alternative offer for the sale” because Bain is committed to buying the business.
In a line seemingly related to the bondholders’ bid, Strawbridge said, “An additional proposal to that from Bain Capital and Cyrus Capital was received, which we considered.
“However, it was highly conditional and contained no evidence of committed funding to enable a transaction to be completed. In these circumstances, we were unable to take this proposal forward given the lack of certainty and the level of conditionality.”
The move to rebuff the bondholders comes despite a Federal Court judge explicitly confirming last week that the group could put their bid forward to creditors for a vote on 26 August.
“The administrators’ preference for one proposal does not justify the exclusion of all other proposals from consideration by the creditors,” Justice John Middleton said in documents also obtained by Australian Aviation.
The letter revealed for the first time an exact breakdown of how much the 10,247 creditors, including 9,020 employees, are owed. In total:
- Secured lenders and aircraft financiers are owed $2,284 million;
- Unsecured bondholders are owed $1,988 million;
- Trade creditors are owed $167 million;
- Aircraft lessors are owed $1,884 million;
- Landlords are owed $71 million;
- Employees are owed $451 million (in the event of liquidation); and
- Customers entitled to credits for flights which were cancelled due to the pandemic are potentially owed $604 million.
Those groups will find out exactly how much money they will receive from Bain’s proposal on 19 August 2020, before the second creditors meeting and vote to rubber-stamp the deal on 26 August.
Bain has already guaranteed employee entitlements, including potential redundancy payouts, will be covered in full as will customers’ travel credits and refunds.
Earlier in July, Virgin Australia’s bondholders said in the Federal Court they would put their alternative proposal to creditors in August.
The revelation came despite the group losing a case to obtain access to secret details of Bain’s bid approved by administrator Deloitte.
The court action was the latest move in a long saga that began when Virgin Australia’s bondholders broke cover and launched an attempt to wrestle control of the airline days before Bain won.
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.