Queensland Government launches Virgin takeover bid

14 May 2020, Written by David Simmons

Queensland Government launches Virgin takeover bid

Since its founding in August 2000 Virgin Australia (ASX: VAH) has called Brisbane home throughout its journey to provide a competitive option for Australian air travel.

But if the Queensland Government is successful with a recent bid, the airline's ties to the state could become even closer.

The Palaszczuk Government confirmed yesterday evening it had appointed the Queensland Investment Corporation (QIC) to facilitate the State's bid for Virgin.

Queensland's bid, dubbed 'Project Maroon', could take the form of a direct equity stake, a loan, guarantee or come in the form of other financial incentives.

"We have been very clear. Two sustainable, national airlines are critical to Australia's economy," Queensland Treasurer Cameron Dick said.

"We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector.

"We saw the punishing increase to the cost of flights after the Ansett collapse, and this Government will not stand by and let that happen again."

QIC CEO Damien Frawley says the restructure of Virgin Australia represents a significant opportunity for the state.

"We are well-equipped to manage the State's interest in Virgin Australia Holdings (VAH) should the consortium be successful. QIC's track record as an acquirer, owner and manager of nationally critical infrastructure for both the Queensland Government and long-term investors supports our consortium bid," says Frawley.

"QIC has long-standing conflict management and governance processes in place which enable us to manage the State's potential interest in VAH, and the bid, while separately managing other clients' investment interests.

"Virgin administrator Deloitte has set an ambitious timeframe and we look forward to delivering on this mandate for the Queensland Government."

Flight credit to be honoured during administration

It was a busy day for Virgin administrators Deloitte yesterday, juggled both the announcement from the Queensland Government and a Federal Court hearing.

The Administrators applied to the Federal Court for orders covering a range of issues, but of particular note was Deloitte's success in ensuring flight credit holders can continue to use credit to book travel during the administration process.

"Normally, customers owed credits or refunds by a company in voluntary administration would become unsecured creditors and be unlikely to receive full compensation by the end of the process," says Deloitte.

"Since the appointment of the Administrators, they have been conscious of the need to find a solution to managing customer requests for refunds and credits for flights paid for before their appointment.

"The Court has today approved conditional arrangements that provide these customers with more certainty and allow them to use credit to book travel during the administration period, and as travel restrictions are lifted."

Deloitte says it expects a new owner will continue to honour flight credits post-transaction, but in the event they do not Deloitte's success in the Federal Court today means these customers will not be worse off.

According to lead administrator Vaughan Strawbridge the administration process is progressing well.

"To date, we have been very pleased with the restructuring and sale of business process, and our engagement with interested parties and an incredibly diverse range of stakeholders from federal and state governments and lessors and suppliers, to regulators and Virgin employees," Strawbridge said.

"We've seen a high level of interest from a number of high-quality parties and discussions with them are progressing very well.

"Importantly in a process such as this, there is plenty of competitive tension, and we remain on track to receive indicative bids by COB this Friday 15 May."

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Business News Australia

 
Author: David Simmons

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