Aviation

WINNER WINNER: Bain Capital triumphs in Virgin Australia bidding war

Huntley Mitchell

Huntley Mitchell

Following a comprehensive sale campaign, Virgin Australia’s administrators have chosen Bain Capital as its preferred bidder to put forward to creditors.

Deloitte announced today that the administrators have entered into a sale and implementation agreement with Bain through both its private equity and distressed and special situations funds.

The agreement will result in the sale and recapitalisation of Virgin Australia Holdings and its subsidiary Virgin Australia Group, which operates airlines Virgin Australia and Tiger.

Completion of the transaction will occur after the second meeting of creditors, which is currently scheduled to occur before the end of August.

No return to shareholders is anticipated as a result of the agreement, according to a statement by Virgin Australia Group.

“At this stage, it is not possible to determine the estimated return to creditors; however, an update will be provided ahead of the second meeting of creditors,” the group said.

Bain Capital has received necessary regulatory approvals under the Australian government’s foreign investment laws to complete the transaction.

According to Deloitte, Bain’s bid supports Virgin’s current management team led by Paul Scurrah and their improvement plan for the airline.

It also commits to the retention of thousands of jobs, carries forward all travel credits and Velocity Frequent Flyer booked flights, honours all employee entitlements, and provides a “significant injection of capital to see the business recapitalised and well-positioned for the future”.

There were doubts that Virgin’s administrators would reach a deal by its June 30 deadline after an eleventh-hour proposal from the airline’s bondholders was lodged on Wednesday in an attempt to scupper the bids by Bain and Cyrus Capital Partners.

According to the statement issued by Virgin Australia Group, the administrators also received “several proposals from other interested parties this week”.

Joint administrator Vaughan Strawbridge described the decision to go with Bain as “an important milestone and a significant achievement”.

“Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia’s second airline, thousands of employees and their families, and ensure Australia continues to enjoy the benefits of a competitive aviation sector,” he said.

“The Virgin Australia Group entered administration as a direct result of an unprecedented global pandemic which all but grounded its operations whilst in the midst of a major transformation of the business led by Paul Scurrah and the management team.

“From day one of our appointment, we have focused on achieving the best possible outcomes that a restructured, sustainable and profitable airline can deliver to all stakeholders.

“In just over eight weeks, this is a very positive outcome. 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.

“This result could not have been achieved without the support and hard work of the Virgin Australia team, who we have had the privilege of working with over the last eight to nine weeks. We would also like to thank them for their ongoing support and engagement.

“I would also like to thank the broad range of bidders who participated in this competitive process, including Cyrus Capital Partners, who worked so hard with us throughout this process.”

Scurrah said: “This is a great day for Virgin Australia and a huge milestone as we move forward with Bain Capital.

“Bain Capital has spent many hours over the past weeks speaking to us and getting a deep understanding of our business and working to secure a deal with our administrators.

“We know they are committed to investing in the airline and we are thrilled to be working with them into the future.”

TWU wants meeting with Bain and government

The Transport Workers’ Union (TWU) has urged the federal government to meet successful bidder Bain and trade unions representing Virgin workers to develop a plan to ensure the long-term survival of the airline.

TWU national secretary Michael Kaine said the union looked forward to working with Bain, but that the process needed major government involvement.

“Both Cyrus and Bain put in serious, strong proposals, which indicates the extent to which Virgin is an excellent investment with a committed and experienced workforce,” he said.

“It also shows the vital place Virgin holds in the Australian aviation landscape.

“Bain put forward a solid bid to secure the administrator’s recommendation and we are happy to work with them on the plan for getting the airline back on its feet.

“But, when we sit down with Bain and the administrators to plan the next steps, we know that there are still many uncertainties which will make decision-making very difficult.

“There is virtually no international travel and domestic air travel is severely curtailed and likely to be so for the foreseeable future. In this context, planning for an airline’s future is near impossible.”

Kaine said the government must stabilise the aviation industry with an extension of JobKeeper support beyond September for all aviation workers.

“Both Virgin and Qantas need financial assistance, support and direction from the government on weathering the difficult months ahead as air travel limps along,” he said.

“But government assistance cannot just be an airline package, as the companies which service the airlines are also effectively grounded and their workforces stood down.

“The government must act urgently on a plan for the aviation sector or risk many thousands of job losses.”

[PLEASE NOTE: This story has been updated since publishing to include comments from Virgin Australia Group boss Paul Scurrah.]


Featured image: iStock/Andrew Hanlon



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