Virgin Australia Administrators Identified Four Serious Foreign Bidders For Airline Takeover

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Virgin Australia and their bankruptcy administrators of Deloitte have shortlisted a total of four bidders so far which were classified as serious investors in an effort to sell off the airline in the next few months.

All four investors are foreign firms with different backgrounds as far as their usual investment portfolio is concerned, the deadline for further bids ends on June 12th.

Previous chatter was that the Queensland government was interested in acquiring Virgin Australia but that might have been a political pipe dream as it was also criticized from many other government figures in Australia. So far Deloitte has not named Queensland as a serious bidder in the process.

You can read up more on it on ABC News Australia (access here).

Virgin Australia and its administrator Deloitte have shortlisted “highly credentialed” parties who could end up being the new owners of Australia’s second major carrier.

ABC News can confirm the shortlist contains four bidders: private investment firm Bain Capital, private equity firm BGH Capital, US aviation investor Indigo Partners and global investor Cyrus Capital Partners.

Cyrus Capital, despite having previously invested alongside Richard Branson in Virgin America and Flybe, was a surprise bidder, having not been one of the many companies touted in the media as participating in the sale process.

Virgin Australia’s appointed administrator, Deloitte, led by Vaughan Strawbridge, has for several weeks been working with the company’s management team on finding a new owner. … Final bids are due on June 12. …

Virgin Australia went into administration on April 21, owing about $7 billion.

There had been about 20 interested parties, including a last-ditch bid by the Queensland Government, but that list was culled at the end of last week.

At least eight “non-binding, indicative” offers were lodged with the administrators on Friday, and negotiations over the shortlist of four took place over the weekend.

Other parties that had considered initial non-binding offers before the shortlist included Canadian investor Brookfield, Indian aviation tycoon Rahul Bhatia, through his company InterGlobe Enterprises, and Australian mining magnate Andrew Forrest. …

Administrators have the responsibility to go carefully through the list of bidders to identify those who are really serious in intent and financial capacity to actually go through with a deal and are interested in the longevity of the company as well as the welfare of the employees.

Whenever there is an airline in administration there are always plenty of ghost proposals by dubious investors and firms who just want their name circulated but never seriously consider placing a bid that goes through in the end. Deloitte has to weed these bad apples out right now.

One loser is already clear: The consumer. As we wrote about last week, the administrators have already said that passengers who had tickets canceled will no longer receive any cash back but instead be issued vouchers. The crux: Nobody knows if these vouchers will hold any value as the new owner isn’t obliged to accept them. A complete disaster and my prediction is that Virgin Australia will find it hard to ever find people again to give them upfront cash in these uncertain times.

Conclusion

Let’s see who else will be listed as a serious bidder by mid June and how the administration process and eventual sale will work out.

Virgin Australia is burdened with more than A$5 Billion in debt and that needs to pretty much disappear in some way or the other. VA currently has 12,000 creditors of which 9,000 are employees. This can still fall apart at the very last minute unless a solid deal is agreed to which for the investor usually means away with the vast majority of debt. Creditors overall will be taking a substantial haircut either way.

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