Virgin Australia bondholders have made an 11th hour bid to try to recapitalise the airline, two days after Administrators Deloitte received final offers from the two final bidders, Bain Capital and Cyrus Capital Partners.
Under the bondholders proposal they would recaptilise the airline to the value of $800 million with an additional $125 million to keep the airline going during the pandemic. The airline would also remain listed on the Australian Stock Exchange with the bondholders becoming shareholders. The plan also sees the retention of the CEO, honouring of employee entitlements, travel credits as well as the Velocity Frequent Flyer program. Under the proposal bondholders would see about 70c in the dollar returned if they immediately sold their shares, instead of the 10c if the airline sells to Bain or Cyrus.
Faraday Associates, representing the bondholders, said in a statement, “Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline. This approach offers the fastest pathway to return Virgin to the new operating environment for Australian aviation and positions the airline to resume high-quality services to its millions of loyal Australian customers.”
The Financial Review has reported that Broad Peak is among the funds among the bondholders. Broad Peak is backed by Temasek, Singapore’s sovereign fund. Tamasek is also a shareholder in Singapore Airlines, which in turn was a part owner of Virgin.
The Australia Licensed Aircraft Engineers Association and the Flight Attendants Association have both backed the Cyrus Capital proposal.
Earlier Cyrus and Bain had made public their plans. Cyrus plans on cutting back routes and capacity, placing Virgin as a mid-tier airline between Qantas and Jetstar. Tigerair would be scrapped. They would also retain CEO Paul Scuarrah and the current management team with workers given more input.
Bain would honour the staff entitlements and equity to the employees that stay through the restructure, stripping the airline to bare bones before growing capacity as travel restrictions lift and also aim at middle of the market.
Deloitte plans on deciding on the winning bid before 30 June then taking the proposal to a creditors meeting in August.