The Queensland government has thrown its hat in the ring to bid for Virgin Australia, as the deadline for non-binding offers draws closer.
Treasurer Cameron Dick confirmed at a press conference yesterday that the state had engaged its investment arm, Queensland Investment Corporation (QIC), to provide “a comprehensive strategy to ensure Queensland is in the best position to be a partner in a successful bid”.
“That may form an equity stake, it may be a loan, it may be some form of concessional arrangement, it may be some sort of other financial instrument,” he said.
“It’s not the intention of the Queensland government to purchase the airline in its entirety, but we want to take a strategic stake to preserve and protect jobs, and to secure our interests, which is a headquarter[s] in Queensland, which is securing jobs, and which is supporting regional communities.”
Dick said the first indicative bids will give the state government a good idea of who is actually serious about returning Virgin to its former glory.
“We want serious players. We don’t want tyre-kickers,” he said.
However, the federal government doesn’t appear to have much confidence in Queensland’s bid, with Home Affairs Minister Peter Dutton describing it as “laughable”.
“Premier Palaszczuk has almost bankrupted Queensland, and now in the middle of a crisis they want to buy an airline,” he wrote on Twitter, which prompted a sassy response from Dick.
Look mate, just stick to cruise ships … https://t.co/Cb4AArVokL
— Cameron Dick (@camerondickqld) May 13, 2020
The Queensland government’s tilt at Virgin is not exactly surprising given the $200 million conditional lifeline it offered the airline prior to its collapse.
Deloitte issues update following federal court hearing
Following a Federal Court hearing on Wednesday, Virgin Australia’s administrators have provided an updated on some of the key goings-on.
Deloitte had asked the court to consider that their personal liability be limited where, during the period of the administration, the business needs to enter into new contracts required to maintain operations such as aircraft leasing and trademarks.
Limitation of liability was granted in relation to of Virgin’s existing charter contract with Rio Tinto, while the hearing was adjourned until Friday for consideration of other matters , including the limitation of the administrators’ personal liability in respect of current and future contracts, as well as the JobKeeper program and intercompany loans.
Furthermore, the court approved conditional arrangements for Virgin customers to use credits for flights paid before Virgin collapsed to book travel during the administration period, and as travel restrictions are lifted. Deloitte said Virgin’s systems will be ready to process requests in coming days.
Lead administrator Vaughan Strawbridge said he expects Virgin’s new owner to continue to honour credits after the administration process.
“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,” lead administrator Vaughan Strawbridge in a statement.
“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.
“We will then work even more closely with the parties we choose to take to the next stage that will allow them to prepare binding offers by 12 June.”
There are a total of 19 interested parties who could make a play for Virgin tomorrow, with private equity firms BGH Capital and Indigo Partners, Canadian-based asset management specialist Brookfield, and Aussie mining magnate Andrew “Twiggy Forrest all rumoured to be among them.
Virgin’s administrators expect to seal a deal by the end of June.
Rex looks to challenge Virgin, Qantas
Meanwhile, Regional Express (Rex) could soon become a legitimate domestic competitor to Virgin and Qantas, with the airline revealing yesterday that it has been approached by several parties who are interested in providing roughly $200m in equity to begin regular flights between Australia’s major capital cities.
“At this juncture, the Rex board believes that with sufficient capital injection, there is a confluence of circumstances which render the start of domestic operations by Rex to be a particularly compelling proposition,” the company said in a statement to shareholders.
“The board is expected to make a decision on whether or not to proceed within the next eight weeks. Should the board decide to proceed, the domestic operations are expected to commence on 1 March 2021.”
Featured image: iStock/TkKurikawa