Bain Capital strikes deal to buy Virgin Australia out of administration
Investment fund Bain Capital has announced that it has agreed to buy embattled Virgin Australia out of administration for an undisclosed sum.
The airline’s administrator Deloitte said that Bain’s bid had been selected over that of rival Cyrus Capital Partners and a proposal from Virgin’s bondholders.
Deloitte admitted that the carrier’s shareholders were not expected to get any return from the deal, and said it could not yet estimate how much bondholders would get.
A spokesperson for the 6,000-strong bondholder group, who are owed a combined AU$2bn, said they would continue to push for their proposal despite Deloitte’s decision.
In order to be ratified, the deal must be approved by 50 per cent of stakeholders both by value and by number.
According to Deloitte, Bain will inject a “significant” amount of cash into the carrier using both private equity and its distressed situation funds.
Australian media reported that the private equity firm would inject AU$600m up front, and then a further AU$600m to cover passenger travel credits, as well as AU$450m for employee entitlements.
Australia’s second largest carrier called in the administrators in April as the coronavirus crisis began to hammer the global aviation industry.
The decision to appoint an administrator came after Canberra elected to reject a plea for a AU$1.4bn loan to keep the flier alive.
Despite commanding a hefty share of the Australian domestic market, Virgin Australia’s debt pile reached AU$5bn (£2.54bn) before the airline appointed Deloitte.
Even before the crisis struck, the budget carrier had recorded losses for the last seven years.