Virgin Australia administrators, Deloitte. have agreed to sell the airline to Bain Capital after the only other remaining bidder, Cyrus Capital Partners, pulled out of the sale process.
Cyrus cited lack of engagement from the administration as the reason for their withdrawal. In a statement Cyrus said, “On the morning of 22 June 2020, Cyrus presented to the administrators of Virgin Australia Holdings an offer to acquire the airline, its regional business and the frequent flyer program Velocity, in accordance with the administrators’ procedures. However, since then, the administrators have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer.” The company also submitted “value improvements’ to it’s offer yesterday morning.
Cyrus founder and chief investment officer Stephen Friedheim has left the door open to a renewed biD ABC Australia reports. “Cyrus firmly believes that the Australian aviation industry has a bright future and would be willing to re-instate our offer if the administrators agree to re-engage in good faith, productive discussions with a view to concluding a transaction that will benefit all key stakeholders — employees, customers, Velocity members and bondholders,” Mr Friedheim said in a statement.
Aviation analyst Neil Hansford told ABC that he believes it was a “face-saving exercise” by Cyrus. ABC reported Mr Hansford saying rhetorically, “Why did they think that ‘full and final’, which was what Monday was supposed to be, that they could still go and put varied offers in after full and final was done on Monday? I really question that they had assembled the funds to be able to go ahead with the transaction.”
The Sydney Morning Herald reports an insolvency expert with knowledge of the deal said it was “highly unusual” for an administrator to stop taking calls in such a situation and it makes them think they wanted Bain all along.
Bain has committed to retaining thousands of jobs, honouring employee entitlements, establishing an employee ownership or profit sharing scheme, honouring all travel credits and Velocity frequent flyer booked flights.
Bain’s Australian based managing director, Mike Murphy, said in a statement, “We are determined to see that Australians have access to competitive, viable aviation services for the long term. Under our ownership we will strengthen Virgin’s regional services and ensure the airline emerges offering exceptional experiences at great value while continuing to service business travellers, as well as those of us travelling for fun or to visit loved ones. Our investment and plan for the airline will support and celebrate Virgin Australia’s unique culture and protect as many jobs as possible for the short and medium term in a way that will make significant jobs growth possible. We appreciate how difficult the current situation is for Virgin Australia staff. They are the essence of the business, and we thank them for their perseverance through this challenging period. Paul Scurrah and his leadership team have also worked tirelessly during the administration period and are critical to our future.”
Virgin CEO Paul Scurrah told 9 News “We believe Bain Capital’s proposal offers the best possible future for Virgin Australia, its employees and its customers. Having worked closely with Mike, Barnaby and their extended team over several months they have demonstrated a deep understanding of aviation and our culture. We are aligned in our vision for Virgin 2.0 and look forward to working with them to secure the airline’s future.” Bain will keep current management including Mr Scurrah.
Deloitte Administrator, Vaughan Strawbridge said in a statement, “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.”
The Queensland state government has also given Bain up to $200 million dollars and other incentives to keep the airline HQ in the state capital of Brisbane.
Final approval still needs to be given by creditors at a meeting to be held by the end of August. It is also possible that bondholders that put in a last minute bid yesterday could put forward their proposal at the creditors meeting. Mr Hansford also told ABC that it is possible that bondholders could work together with Bain to bring forward just the one proposal to the creditors.
Bain was founded in 1984, has 19 offices with 240 investment managers worldwide and $US105 billion under management.