Bain Capital selected as successful bidder for Virgin Australia
26 June 2020, Written by David Simmons
Virgin Australia's (ASX: VAH) administrators Deloitte have named Bain Capital as the successful bidder for the company after Cyrus Capital Partners pulled out of the running this morning.
Following a comprehensive sale campaign the administrators have today entered into a sale and implementation agreement with Bain Capital.
The agreement will result in the sale and recapitalisation of Virgin Australia Holdings and its subsidiary business (VAH Group) that operates Virgin Australia and Tiger Airlines.
The transaction will be completed after the second meeting of creditors, which is currently scheduled to occur before the end of August.
Administrators Deloitte said that Bain has already received necessary regulatory approvals under the Australian Government's foreign investment laws to complete the transaction.
This is the second airline industry transaction for Boston-based Bain since May, after the company acquired a majority stake in Japanese airplane manufacturer Showa Aircraft Industry for around $1.23 billion.
As part of its successful bid, Bain has committed to supporting the current management team at Virgin led by Paul Scurrah.
Bain has also committed to retaining "thousands" of jobs at Virgin and will carry forward all travel credits and Velocity frequent flyer booked flights.
The American company will also honour all employee entitlements and will provide an injection of capital to see Virgin recapitalised and positioned for the future.
"This is an important milestone and a significant achievement," says Deloitte joint administrator Vaughan Strawbridge.
"Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia's second airline, thousands of employees and their families and ensure Australia continues to enjoy the benefits of a competitive aviation sector.
"In just over eight weeks, this is a very positive outcome. We have certainly been heartened by the levels of interest shown by parties, in spite of the prevailing COVID-induced market conditions, how our final two groups have approached their bids, and how support for the business has come from so many quarters."
According to Virgin no return to shareholders is anticipated.
Further, Virgin says it is not possible to determine the estimated return to creditors, but an update will be provided by the company ahead of the second meetings of creditors.
Virgin Australia entered into administration in April this year after 20 years in business.
Coronavirus restrictions proved to be too much for the airline, depsite hundreds of millions in Federal Government relief.
The company fell into administration with around $5 billion of debt after being unprofitable for approximately seven years during which it lost about $1.9 billion.
CEO Paul Scurrah was appointed in March 2019 to replace former chief executive John Borghetti, who had helmed Virgin for a decade and was appointed when the airline was still named Virgin Blue.
At December 31 the group's liabilities exceeded its assets by $1.6 billion, it had a cash balance of $1.1 billion and debt was on the rise.
Around 8,000 employees were stood down earlier this year to save cash as flights were grounded, with a further 1,000 staff made redundant including its Tigerair pilots and New Zealand-based crew.
In March the airline suspended virtually its entire flight network save a handful of flights considered essential by the Federal Government.
The group's frequent flyer program Velocity is a separate company and did not fall into administration.
Business News Australia
Author: David Simmons