Jamie Smyth in Sydney
The battle to gain control of Virgin Australia has taken a dramatic turn on Wednesday, with some of its bondholders, the introduction of the eleventh hour of the recapitalisation of the proposal with the board, in the hope of recovering a portion of their A $ 2 billion ($1.4 billion) investment in the airline.
Virgin and administrator Deloitte is the evaluation of two private equity bids for the difficulty of the airline consortia led by US private equity firms, Bain Capital and Cyprus Capital Partners, and is expected to announce a preferred bidder next week.
But the entry of the Virgin bond holders in the process, which, as a group are one of the airline’s largest creditors, which may complicate the directors ‘ efforts to complete the restructuring of the company Has$7 of the debt in August.
A person with knowledge of the proposal of the bondholders, to propose the injection of $ 1 billion in financing costs in the airline struck by the genius of a debt-for-share exchange to reduce its debt burden, and of the re-registration of the Blank on the ASX.
The holders of bonds, which include up to 30 large foreign and national institutions and more than 5,000 retail bond investors expect to recover 70 cents in the dollar on their initial investment, compared to as little as 10 cents on the dollar, under the takeover offers from Bath and Cyrus.
The holders of bonds, which is advised by Faraday Partners and Corrs Chambers Westgarth, proposes keeping the Virgin of the existing management team and to follow its strategy of restructuring the airline to a post-Covid-19 world.
Some restructuring experts have said that holders of bonds last barrier to play for the airline could not be reduced, but their position as unsecured creditors by limiting their bargaining position with the administrator.
“Administrators don’t really need to enter into an agreement with the unsecured creditors, it is the secured creditors, they must find an agreement,” said Tom Smith, a professor at Macquarie Business School, Sydney.
Mr. Smith said a more important in the battle for control of the Virgin has been the company’s 9,000 employees, who are secured creditors, and one of the airline’s most valuable resources.
Cyrus and Bath have both had discussions with the unions in recent weeks and that provides employees with equity incentives as part of their pitch to win the support of their offer.
Richard Branson of Virgin Group is expected to hold talks with any successful bidder for the airline on the retention of the Virgin brand.
Virgin Australia has been one of the first global airlines to collapse as a result of Covid-19, which had brought most of the domestic and international flights at the end of April.
Its major shareholders — Singapore Airlines, Etihad, HNA and China’s Nanshan group own about 20%, while Richard Branson of the Virgin group holds 10%. The administration process is intended to wipe out their equity participation in the airline.