Bain Capital agrees with Virgin Australia administrator to acquire struggling airline

FILE PHOTO: Travellers stand at a Virgin Australia Airlines counter at Kingsford Smith International Airport during the coronavirus outbreak, in Sydney, Australia, March 18, 2020. REUTERS/Loren Elliott/File Photo

U.S. private equity group Bain Capital said on Friday it has agreed with the administrator of Virgin Australia Holdings Ltd to buy Australia‘s second-biggest airline for an undisclosed sum, banking on an aviation industry recovery.

Bain‘s bid was chosen over a rival offer from Cyrus Capital Partners and a recaptalisation proposal put forward by Virgin Australia bondholders,  administrator Deloitte said.

Deloitte said it was not yet possible to estimate the return to creditors and did not expect any return to shareholders. An update on the return will be provided ahead of a creditor’s meeting in August, it said.

Many contracts with suppliers and aircraft lessors must be renegotiated before the return to creditors can be finalised, a source with knowledge of the matter told Reuters on condition of anonymity.

The deal will need to be approved by 50% of creditors by value and 50% by number to be finalised.

Bain is using private equity as well as its distressed and special situation funds for the deal, according to Deloitte, which said the deal provided a “significant” injection of capital into the airline.

Bain plans to strengthen Virgin‘s regional services and ensure the airline offers good value for leisure customers while continuing to serve business travellers, Mike Murphy, an Australia-based managing director at Bain, said in a statement.

Virgin Australia entered administration in April owing nearly A$7 billion ($4.82 billion) to creditors, but is viewed as an attractive investment given the Australian domestic aviation market duopoly it shares with larger rival Qantas Airways Ltd.

Cyrus on Friday morning said it had pulled out of the bidding, citing Deloitte’s unwillingness to engage in meaningful talks.

The Bain proposal supports Virgin Australia‘s current management team, led by Chief Executive Paul Scurrah, and its improvement plan for the airline, Deloitte said in a statement.

Virgin Australia has about 9,000 employees and Bain plans to keep 5,000 to 6,000 and operate 60 to 70 of its Boeing Co 737 planes, Murphy told The Australian Financial Review on Friday, adding the airline could break even by February. Bain did not respond immediately to a request for comment.

Qantas on Thursday said it would cut more than 20% of its 29,000-strong workforce because of the bleak international travel outlook associated with the coronavirus outbreak.

Virgin Australia has a smaller international business than Qantas and is more exposed to the domestic market.

Reuters

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.