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US private equity group Bain Capital said on Friday it had agreed with Virgin Australia Holdings Ltd’s manager to buy Australia’s second-largest airline for an undisclosed sum, expecting a recovery from the aviation industry.
Bain’s offer was chosen over a rival offer from Cyrus Capital Partners and a recapture proposal put forth by Virgin Australia bondholders, administrator Deloitte said.
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Deloitte said it was not yet possible to estimate the return to creditors and that he did not expect any return to shareholders. An update to the statement will be provided ahead of the creditors’ meeting in August, she said.
Many contracts with aircraft suppliers and lessors must be renegotiated before a return to creditors can be finalized, a source with knowledge of the matter told Reuters on condition of anonymity.
The agreement must be approved by 50% of the creditors by value and 50% by number to finalize.
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Bain is using private capital, as well as its funds in special situations and struggling for the deal, according to Deloitte, who 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 travelers, said Mike Murphy, an Australian-based managing director in Bain, in a statement.
Virgin Australia came into administration in April due to almost $ 7 billion ($ 4.82 billion) to creditors, but is considered an attractive investment given the Australian national aviation market duopoly that it shares with its larger rival Qantas. Airways Ltd.
Cyrus said Friday morning that he withdrew from the tender, citing Deloitte’s unwillingness to engage in meaningful talks.
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Bain’s proposal supports Virgin Australia’s current management team, led by CEO Paul Scurrah, and his upgrade plan for the airline, Deloitte said in a statement.
Virgin Australia has around 9,000 employees and Bain plans to maintain 5,000 to 6,000 and operate 60 to 70 of its Boeing Co 737 aircraft, Murphy told The Australian Financial Review on Friday, adding that the airline could reach break-even point in February. Bain did not immediately respond to a request for comment.
Qantas said Thursday it would cut more than 20% of its 29,000-person workforce due to the bleak international travel prospects associated with the coronavirus outbreak.
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Virgin Australia has a smaller international business than Qantas and is more exposed to the domestic market.
($ 1 = 1.4520 Australian dollars)
(Reporting by Jamie Freed and Paulina Duran; Additional reporting by Scott Murdoch in Hong Kong; Grant McCool, Christopher Cushing and Gerry Doyle edition)
