Aviation

Virgin update: Creditors owed $6.8bn, suitor’s “Team Australia bid” and Scurrah’s CEO challenger

There have been quite a few interesting developments in the administration process of Virgin Australia, as the airline’s future hangs in the balance.

After it was originally thought that Virgin’s debt pile was around $5 billion, the administrators at Deloitte have revealed that the total amount owing to creditors is more than $6.8 billion.

According to an affidavit lodged to the Federal Court by Deloitte’s Vaughan Strawbridge last week, secured lenders are owed approximately $2.3 billion, unsecured bondholders are owed approximately $2 billion, trade creditors are owed approximately $167 million, aircraft lessors are owed approximately $1.9 billion, landlords are owed approximately $71 million, and employees are owed approximately $450 million.

Deloitte has identified that Virgin has more than 10,000 known creditors in total (including approximately 9,020 employees), but expects this number to increase to over 12,000 as more information becomes available.

There has been a bit of speculation around whether unions representing workers will look to try and appoint a rival firm such as KordaMentha to ensure a fair administration process, given Deloitte recently disclosed it had worked with Virgin on other advisory and restructuring work in the past.

However, the Australian Federation of Air Pilots, the Transport Workers Union and the Australian Licensed Aircraft Engineers Association told The Australian that they were satisfied with Deloitte leading administration proceedings.

Meanwhile, one of Virgin’s suitors has told Deloitte, as well as the federal and state governments, that it will provide certainty to the carrier’s staff if its “Team Australia” bid is successful.

According to The Australian Financial Review, BGH Capital has also warned the relevant parties that other private equity firms and hedge funds from overseas may not show as much mercy to Virgin employees.

To further prove BGH is serious about a potential play for Virgin, The Australian reported that firm has has tapped advisory specialists Moelis for a possible recapitalisation of the airline.

It’s been speculated that BGH will make a move for Virgin as part of a consortium rather than going solo, with AustralianSuper popping up in multiple media reports as a likely partner.

And, finally, it appears Paul Scurrah (pictured above) could have a challenger for the top role at Virgin following the administration process, with John Thomas telling the AFR he would throw his hat in the ring for the CEO position if it became available.

Thomas is no stranger to Virgin, having led the airline’s domestic and international operations between 2016 and 2017.

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