Bain slams bondholders’ bid for Virgin as ‘not credible’

written by Adam Thorn | August 11, 2020
A Virgin Australia Boeing 777-300ER, VH-VPD, shot on 8/8/2020, taking off from Brisbane Airport. (Craig Murray)

The ‘winning’ bidder for Virgin Australia, Bain Capital, has said a rival proposal put forward by bondholders is “incomplete” and “not credible”.

The group added in a statement that the offer submitted by Broad Peak Investment Advisers and Tor Investment Management was actually designed to “frustrate the administration process by creating as much noise and interference as possible”.

Bain beat out Cyrus Capital Partners in May 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.

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Last week, The Australian reported that the bondholders submitted a deed of company arrangement to Virgin’s administrator Deloitte, which included a seat on the board for an employee representative.

In a response released on Tuesday, Bain said, “Stakeholders need certainty and stability, so for the sake of the airline and its employees, Bain Capital will not be distracted by it. They do not speak for all bondholders.

“These hedge funds are offshore and specialise in high risk and high yield debt trading. They are not set up to own or provide stewardship for such a significant company such as Virgin Australia.

“They have no aviation or direct airline ownership experience together. Neither has an office in Australia.”

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Even though Bain has pumped $125 million into the business to keep it trading, the deal won’t be rubber-stamped until a creditors meeting later in August.

The Federal Court has already confirmed the bondholders have the right to put forward their alternative plan for a vote.

Bain’s putdown comes after Deloitte itself similarly criticised the bondholders’ bid, which it said was “highly conditional and contained no evidence of committed funding”.

“In these circumstances, we were unable to take this proposal forward given the lack of certainty and the level of conditionality,” added Deloitte.

The bondholders have made their move because they are owed $1,988 million and have been told they will not receive the full amount. In total, 10,247 creditors, including 9,020 employees, are owed around $7 billion.

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.

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3 Comments

  • Mike

    says:

    One wonders why Bain is so worried by the Aussie bondholders’ offer.
    Until Bain signs an actual contract, Deloitte’s should still listen to any other interested party or parties.
    This is only right, & fair to all, to obtain the best possible outcome.

  • Rod Pickin

    says:

    It appears to me that the administrators handling of the VOZ problem has been too hurried and not entirely accommodating to the various serious contenders seeking ownership/control of this enterprise. We had the rather early unexplained exit from the exercise of a fine highly credentialed Oz based bidder, we now have the “Bond holders” inspired, understandably by a court decision seeking their inclusion within the decision and lastly we have a private equity group who was in competition with a similarly same country based bidder who also opted out of the process without explanation allowing Bain to don the crown of ownership, ( pending ratification) who has plowed heaps of money into VOZ to maintain operations of a type/order/future as yet to be defined. Now to me, something just does not add up here and considering the current airline climate in Oz it must be time to stop, we can, be up front and visual with where we are going and how and who with. It is not good enough to just cherry pick the good bits and forget the rest, that may be the American way but this is Oz and the decision as it would appear to stand with Bain totally disregards the thousands of our citizens inside the coastline who as a result will have no air service any more, not forgetting the folk that will not have a job anymore; – it is just not good enough. I know it is business but if you don’t have a customer you don’t have a business.

  • Linda Weaving

    says:

    How can any agreement that shortchanges debtors be accepted by the administrator? That is entirely unjust. I hope that at the least, employees will be paid the full amount they are owed. They are the ones without whom the airline would never have existed in the first place!

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