Virgin bondholders make $925m pitch for control of airline
Virgin Australia's bondholders have offered to pour $925 million into the bankrupt airline as part of an eleventh-hour relaunch plan that would see them emerge as the carrier's new owners.
Sydney advisory Faraday Associates lodged the alternative proposal on behalf of unsecured bondholders owed $2 billion with Virgin's administrator Deloitte at 7am on Wednesday.
Virgin's unsecured bondholders say the airline should not be sold for "pandemic prices". Credit:James Alcock
There has been growing anxiety among bondholders they will get as little as 10¢ in the dollar of what they are owed or nothing at all under a sale of Virgin to shortlisted bidders Bain Capital or Cyrus Capital Partners.
Virgin would remain listed on the Australian Stock Exchange under the proposal, as flagged by this masthead on Monday, with shares issued to about 6000 bondholders made up of around 30 major institutional investors and thousands of "mum and dad" retail investors.
Bondholders would put up $800 million to recapitalise Virgin, which went into voluntary administration with debts of $6.8 billion in April, as well as $125 million to keep the airline alive during the administration process.
"Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline," a spokesman for Faraday said in a statement.
"This approach offers the fastest pathway to return Virgin to the new operating environment for Australian aviation and positions the airline to resume high-quality services to its millions of loyal Australian customers."
Bondholders that choose to sell their shares immediately would recover around 70¢ for each dollar they are owed, or could hold onto their shares with the hope of selling at a higher price once the global aviation industry has recovered from the COVID-19 pandemic.
Faraday's argument is that Virgin should not sold for "pandemic prices" and there will be a better outcome for creditors if they take ownership until state and national borders reopen.
Like Cyrus and Bain, the bondholder group backs Virgin's existing management led by chief executive Paul Scurrah and its "Virgin 2.0" relaunch plan which includes stripping its domestic fleet back from multiple aircraft types to just its Boeing 737s and focus them on flying profitable routes.
Deloitte has not said whether it will consider the Faraday proposal alongside Bain and Cyrus, which lodged their binding offers on Monday. Deloitte has said it will choose a preferred bidder by next Monday and will present that at a vote of creditors in mid-August.
Faraday, lead by former Lazard and Goldman Sachs banker Lachlan Edwards and ex-Herbert Smith Freehills partner John Nestel, was admitted to Virgin's dataroom two weeks ago to start assessing the business with the help of Virgin Australia co-founder Rob Sherrard.