Aviation

The bad news for Virgin Australia’s shareholders

Virgin Australia’s bondholders are anxiously waiting to find out how much they will recover from the $2 billion they are owed, after the airline’s shareholders were dealt a nasty blow.

In a letter of declaration signed earlier this week, joint administrator Richard Hughes said his team at Deloitte don’t expect Virgin Australia’s creditors to be repaid in full as a result of Bain Capital’s deal with the airline.

“On this basis, under Section 104-145 of the Income Tax Assessment Act 1997, we declare that we have reasonable grounds to believe that there is no likelihood that shareholders of VAH will receive any distribution for their shares,” Hughes wrote.

“Depending on individual tax circumstances, shareholders may rely on this declaration to claim capital losses in the income year in respect of their shareholdings in VAH.

“Shareholders should seek their independent legal and taxation advice in respect of the consequences of this declaration.”

Singapore Airlines, Etihad Airways and Chinese conglomerates HNA and Nanshan each owned 20 per cent stakes in Virgin Australia, while Richard Branson’s Virgin Group held 10 per cent, and the other 10 per cent was made up of smaller investors.

Hughes made no mention of Virgin’s bondholders in his declaration letter. However, The Australian Financial Review reported that they are estimating a return of between 6.5 cents and 10 cents for every dollar owing.

It’s important to remember though that the sale process for Virgin isn’t done and dusted.

Creditors will convene before the end of August to vote on the deal offered by Bain, and there’s still a chance that the airline’s bondholders could block it with their last-minute proposal.


Featured image: iStock/Andrew Hanlon

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