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Virgin bondholders receive tiny return in Bain deal

written by Adam Thorn | August 25, 2020

Virgin Australia Boeing 737-8FE departs from Brisbane
Virgin Australia Boeing 737-8FE departs from Brisbane at sunset (Michael Marston)

Virgin Australia’s new owner Bain Capital has confirmed unsecured creditors, including bondholders, will receive between just nine and 13 cents in the dollar on their investment.

Bondholders admitted defeat last week in their bid to gain control of the airline, but their offer was speculated to generate a far higher return of more than 50 cents in the dollar. The group, represented by Broad Peak and Tor, have hinted they could take legal action if they are unsatisfied with the final outcome.

In a statement made to the ASX on Tuesday morning, Bain finally confirmed the full details of their offer to take control of the airline, which will need to be rubber-stamped by creditors in a crunch meeting on 4 September. It reveals that:

  • The total commitment of Bain is $3.5 billion;
  • All employee entitlements will be paid in full;
  • All customers travel credits will be honoured;
  • Bain will repay a “significant portion” of secured debts and aircraft lease debts; and
  • Will return between $462 million and $612 million to unsecured creditors.

Deloitte’s Vaughan Strawbridge, who has overseen the administration process, said the deal represents an “excellent outcome” for Virgin Australia.

“We have set out our opinion to creditors that it is in their interest to approve the deed of company arrangement proposed by Bain as it provides for the best return to creditors in what are extraordinary circumstances, and that were impossible to foresee,” said Strawbridge.

“This will provide certainty for the business under new and committed owners. It provides certainty for employees and customers. It provides a return to creditors. And it can be completed sooner, and at less cost to creditors.”

Creditors will now vote on the proposal in a second meeting on 4 September. However, should they reject the deal, the airline will still be sold to Bain in an ‘asset sale agreement’ – meaning Bain has now effectively won.


The administrator confirmed in July that shareholders were unlikely to receive a cent under the deal, and that other creditors would only see limited returns.

In July, Australian Aviation revealed the total breakdown of money owed was:

  • 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 that were cancelled due to the pandemic are potentially owed $604 million.

Bain beat out Cyrus Capital Partners in May to become the administrator’s preferred bidder for the airline, yet bondholders fought on to recoup more of their investment. However, their fight all-but ended last week when a Federal Court judge ruled administrator Deloitte didn’t have to put the alternative bid to a shareholder vote.


The bondholders said in a statement that while their offer represented a “superior outcome for all stakeholders”, they were “left with no choice” but to pull out after the court’s ruling.

The investors then hinted at potential further legal action should they not be offered a satisfactory return.

“We reserve our rights to take whatever action is necessary to protect our interests as creditors,” said a spokesperson.

Bain will still require its offer to be rubber-stamped by investors at the meeting in early September, and that will also likely require backing from the business’ employees, who represent 9,020 of the total number of creditors and are owed $451 million in total.

Significantly, it has previously been reported that relations between TWU and Bain appear to have strained.

Australian Aviation understands there is anger over the rumoured involvement of former Jetstar chief executive Jane Hrdlicka, who had a notoriously fraught relationship with unions in her role at the Qantas Group.

Comments (3)

  • Rod Pickin


    As it stands there is no way that I can agree that the Bain bid/deal is the best outcome for VOZ but in the absence of any other formally approved offer, it is the only bid and by default it is therefore the best bid. The alternative, liquidation, would see a vastly depleted result inflicting more pain and suffering for the folks that actually made the enterprise work. I would be very interested to see how much money has actually been injected into the Bain bid by the Qld. State Govt. and or it’s financial arm, QIC not forgetting of course, “Tricky Dicky”, his very quiet behaviour during this episode has me intrigued. What an absolute and avoidable mess.

  • Steve A


    Incredible! Incredibly that anyone thinks that a failed airline like VA, is actually worth $3.5 billion. Stupidity?
    VA does have value in it, but nothing like that.
    It’s main value is it’s incredibly loyal and dedicated staff. In the past, they have amazed me. But many of them have been let go. A different strategy being put into place could have saved many of them.
    It’s next highest value is in it’s loyalty program. But, like QF, VA has never leveraged up it’s loyalty program properly. QF thinks that it’s loyalty program is worth $500 million in profits each year. And the way that it is run, it is. But it’s actually worth much,much more than that if different strategies were implemented. QF,and VA, could be generating billions out of their loyalty programs within 5 years if they made some changes. In my proposal to Malcolm Turnbull in 2016, to set up a Federally owned airline, I set out a plan to do just that, saying that $5 billion profit was achievable within 5 to 10 years. I sent a similar proposal to the Queensland government. I received ” Dear John” letters back from both .
    Again in 2020, I sent another proposal for a re-nationalised QF or a nationalised VA to the current Prime Minister, the Queensland government, and to the Victorian government, and got back ‘Dear John” letter back from the Deputy PM, Q I C, a n d no reply from Victoria. Nobody believes that it’s achievable, but nobody has taken the time to sit down with me and let me go through it.
    Lastly, having a fully operational airline structure in place has a lot of value. It’s ready to go, but with few places to go just now. But there’s plenty to plan for, for the future, right now.
    I place very little value on the B738 fleet. People say that it is the best aircraft for the job, but it’s not. It has no credible successor. The MAX has no public credibility and very little to match the A320 options available such as the A321LR and A321XLR versions, which open up a wide range of options for the future.
    My ideal narrow body fleet would start with E175 E2’s through to E195 E2’s to cover the smaller routes, along with A320neos through to A321XLRs.
    But I cannot imagine how anyone was duped into paying $3.5 billion for VA. It’s just not worth that much.

  • Jamie


    To Steve A above…..

    What’s the chances Bain, IF the deal’s finalised, will offload it in 2-3 years’ time?
    The $3.5bn is what their initial input is, which would probably get the airline through just maybe, 2-3 operational years.
    But what will be their ONGOING input $$$$$$, as costs rise exponentially as time goes on.
    Of ANY business in the world, an airline goes through more cash than most, as its’ costings’ fluctuate hugely.
    As the old saying goes, ‘if you want to run a small airline, start with a big one’.

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