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Bain Capital receives creditor approval to buy Virgin Australia
September 4th 2020
Virgin Australia (VA) creditors have overwhelmingly backed the proposed purchase of the airline by Bain Capital, administrators for the financially-struggling carrier Deloitte said today. Read More »
A meeting of creditors conducted online voted to formally approve a deed of company arrangement (DOCA) that would transfer ownership of VA to the United States-headquartered private equity firm.
Under the terms of the DOCA, some of the details of which were part of the administrators' report to creditors in late August, Bain Capital would honour all customer travel credits and prepaid flights and pay out all staff entitlements (including those who will lose their jobs under the restructured and slimmed-down airline).
Unsecured creditors were told they should expect to receive between nine and 12 cents in the dollar on their claims, from a pool of funds between A$462 million (US$336 million) and A$612 million.
Bain Capital managing director, Mike Murphy, said in a statement the vote was an important milestone in the airline's recovery.
“We can now continue the rebuilding process from the strongest possible platform and with the least disruption," Murphy said.
"We are working closely with Virgin management to build a stronger, more profitable and competitive Virgin Australia, and we look forward to the future with confidence.”
The DOCA was expected to be formally signed within the three weeks, VA said in a separate statement. It would then be sent to the Federal Court of Australia for its approval, with the transfer of shares expected to be completed by October 31.
“This outcome provides certainty for employees and customers, a return to creditors, opportunities for suppliers and financiers to continue to trade with the Virgin Australia Group as well as maintaining a competitive Australian aviation industry for the benefit of consumers," administrator Vaughan Strawbridge from Deloitte said.
“While the outcome of the meeting today is a significant milestone for both the future of Virgin Australia and Australia’s aviation industry more broadly, we also acknowledge those loyal Virgin Australia Group employees who will lose their jobs and the difficulties that this will cause them and their families as well as the numerous suppliers and investors who will not receive all of the monies owed to them."
VA group CEO, Paul Scurrah, said the creditors' vote gave everyone at the company "some more certainty" regarding its future.
"This is an important outcome for Virgin Australia, which brings us closer to exiting administration and allows us to focus on the future," Scurrah said.
“It’s vital for Australia to have two major airlines for consumer choice, value airfares and to help support the recovery of Australia’s robust tourism sector after this crisis is over."
VA was placed in voluntary administration in April with some 15,000 creditors – such as staff, bondholders, aircraft leasing companies and other suppliers – owed about A$6.8 billion.
Since then, the airline has continued to operate some domestic services while the administrator sought a new owner.
VA management, along with the administrators, have also been working on a new business plan for the airline post-administration, with some details announced in early August.
This included operating a single fleet type of Boeing 737-800s focused on core domestic and short-haul international routes, ending the Tigerair Australia brand and suspending all long-haul international flying.
The six A330-200 and five Boeing 777-300ER widebodies, as well as ATR turboprops and Airbus A320s operated by Tigerair, would be withdrawn.
Some 3,000 staff were expected to be made redundant.
Once the transaction was complete, VA's five major shareholders would have their ownership stakes wiped out. This included Etihad Airways, which held 20.94% of VA stock before the airline entered voluntary administration, Singapore Airlines (SIA) at 20.09% and HNA Group at 19.82%. Sir Richard Branson's United Kingdom-based Virgin Group held 10.42% and China-based conglomerate Nanshan 19.98%.
