Virgin’s administrators reveal sale price to Bain, after rogue bondholders retreat

Huntley Mitchell

Huntley Mitchell

The administrators of Virgin Australia Group have issued their all-important report to creditors, recommending approval of the takeover proposal by Bain Capital.

According to the report, Bain’s proposed deed of company arrangement (DOCA) ensures all employee entitlements are paid in full, customer travel credits are honoured, a number of supply and finance arrangements continue, and unsecured creditors receive a return of between $462 million and $612 million (or between nine and 13 cents in the dollar).

While not specifically identified in the report, the total commitment from Bain Capital is valued at around $3.5 billion.

Joint administrator Vaughan Strawbridge of Deloitte said that the DOCA results in the best outcome for creditors and will secure the future of Virgin as it emerges from voluntary administration.

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

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

“It achieves all the objectives of the voluntary administration process that we sought from the outset. Now we just need to bring the airline out of administration as soon as possible.

“Where we are today is a testimony to the commitment of the staff and all stakeholders of the business who have made this possible and so strongly supported the administration process.”

Virgin’s creditors will be asked to decide to either accept Bain’s DOCA proposal, return the company to the control of the directors, or put it into liquidation at the second meeting of creditors on 4 September.

But, even if the creditors vote against the private equity player’s DOCA proposal, the administrators have signed a binding agreement Bain for it to acquire Virgin by way of an asset sale.

A group of rogue bondholders were hoping to block the sale of Virgin to Bain with an alternative proposal at the second meeting of creditors.

However, after having its application for the alternative bid to be voted on against Bain’s rejected in the Federal Court last week, the bondholder group – made up of hedge funds Broad Peak Investment and Tor Investment Management – decided to retreat on Friday.

“While we maintain that our recapitalisation plan represents a superior outcome for Virgin Australia and its stakeholders, we acknowledge the Federal Court’s decision. We are undoubtedly disappointed,” the bondholders said in a statement.

“Australia deserves a strong second airline and we genuinely believe our recapitalisation proposal is the best long-term option for Virgin Australia and its stakeholders.

“It represents a superior outcome for all stakeholders and maximises the return to creditors, which is the primary objective of the voluntary administration process.

“We believe that relaunching the airline as an Australian publicly-listed company is a preferable outcome for Australia. It is clear that many large institutional as well as retail creditors agreed and supported our proposal, for which we are thankful.

“Unfortunately for now, we are left with no choice after the Federal Court decision but to withdraw our proposal, as it is not possible to complete due diligence and present a substantially unconditional DOCA to the second meeting of creditors.

“After the release of the administrators’ report, we reserve our rights to take whatever action is necessary to protect our interests as creditors.”

TWU welcomes report, chastises federal government

The Transport Workers’ Union (TWU) welcomed the administrators’ report as another milestone for the airline.

“Today is another significant day for Virgin and its thousands of workers,” TWU national secretary Michael Kaine said.

“The creditors’ report details the promises Bain Capital has made in its proposal to take over Virgin and will be voted on next week. We will meet workers and discuss the next steps.

“Our focus remains on making sure workers and the travelling public are at the forefront of planning for the airline’s future. We remain united with other Virgin unions on this aim.”

“Virgin will be successful if the skills, experience and dedication of its workers are recognised as a valuable asset – not an expense.

“We want to work to ensure that the Virgin’s sale is not simply a financial transaction but a community transaction, recognising that it will affect future generations of Australians.”

Kaine said the union will “hold the federal government to account over its failures on Virgin”.

“It has provided little direction or assurances on the future, despite the fact that tens of thousands of jobs are dependent on Virgin getting back up and running,” he said.

“The government continues to resist calls to implement a national plan to save jobs and businesses as the future of aviation remains entirely in the balance.”

Featured image source: iStock/Andrew Hanlon