A Sydney-based advisory firm is proposing a debt for equity deal that could see it snatch control of Virgin Australia. Just hours before the deadline for final bids in the collapsed airline, bondholders have got together to present a deal to the airline’s administrator. It’s a proposal, the bondholders argue, that offers greater bang for the buck than what’s already on the table.
Bondholders looking to get a better deal
Following the airline’s collapse, Virgin Australia bondholders have been left holding around US$1.43 billion of unsecured debt. The professional advisory outfit, Faraday and Company, is now representing a number of those bondholders. They have been talking to Virgin Australia’s administrator, Deloitte, for the past fortnight. Faraday wants to swap debt for equity and pump more cash into the airline. If successful, they will have disrupted a carefully calibrated process to relaunch Virgin Australia.
The two shortlisted bidders, Bain Capital and Cyrus Capital Partners are due to submit their final, binding bids by the close of business on Monday. The well resourced Bain Capital is tipped to come out the winner. But Cyrus Capital Partners has been consistently under-estimated throughout the entire process.
Final bids due tonight, but some disquiet at bidder’s plans
The Australian Government is keeping a close eye on the administration process. Last week, there were reports that the government was unhappy with both Bain and Cyrus Capital’s plans to streamline Virgin Australia. The government fears a relaunched airline will concentrate on busy trunk routes at the expense of regional routes.
However, given that the Australian Government has repeatedly declined to invest in or lend to Virgin Australia, their concerns may fail to gain much traction at Deloitte.
Also unhappy are several unions representing some 10,000 Virgin Australia employees. They fear substantial job losses with either a Bain or Cyrus owned airline. The unions are said to be less than impressed with the details of both bids. Collectively, the Virgin Australia employees make up the bulk of the collapsed airline’s creditors.