Virgin Australia Financially Secure? [Now in Voluntary Administration]

[jakeseven7]

Interesting AFR article I saw: (it may be paywalled, perhaps Google or find it via facebook).

Inside the failure at Virgin Australia

Virgin Australia CEO Paul Scurrah's "a-ha" moment came when New Zealand Prime Minister Jacinda Ardern stepped up on the evening of March 19 to announce that her country was closing its borders that night.

www.afr.com

If his ‘aha moment’ was that late in the game, it’s not a glowing endorsement for his job application to run VA2!

Actually has PS actually formally confirmed he will be going for CEO of VA2?

 

[samh004]

Unless this is noted elsewhere I see there are nine suitors.

• Andrew Forrest's Tattarang
• BGH Capital
• Brookfield Private Equity
• Bain Capital
• Oaktree
• Apollo
• Platinum Group
• Indigo Partners
• InterGlobe Enterprises

 

[Doctore1003]

Yep nine, and the local bidders may have an edge due to no FIRB review requirement. BGH has also had more time to review the financials and speak to key stakeholders. We should find out the three bidders on the final shortlist early next week.

http://www.afr.com/business/transport/aviation/virgin-sale-to-pass-first-hurdle-20200514-p54t9e

 

[jakeseven7]

Yep nine, and the local bidders may have an edge due to no FIRB review requirement.

Local bidders won’t have an edge in respect to any government /review approval because the government doesnt care if VA2 is majority foreign owned and controlled again - they’ve stated that.

They couldn’t exactly slam down the grill and say no, that’s no okay anymore but we were fine with it being owned by foreign government backed entities before.

The government has to be very very careful now because any special conditions they impose (which they won’t) could come back to bite them if VA1 liquidates OR VA2 goes belly up.

They’ve already got special conditions imposed on their national carrier and now that is exactly why QF would be saved (if it needed to be which appears unlikely at this point). Ironically it’s these conditions QF fought to get rid of so many times which now make it a protected species! But that’s way off topic.

The only wildcard is China with everything going on at the moment. Does anyone know if the Chinese / Chinese government is behind or funding any of the VA2 bids?

 

[Doctore1003]

The FIRB point is about the extra time it would take - time VA may not have. From the article:
Lead administrator Vaughan Strawbridge said foreign bidders may require Foreign Investment Review Board approval, wihch could drag out the time table.

"There potentially are parties that do require FIRB approval and that will dictate on how many parties we take forward. At this point, we would expect to be no more than three [bidders on the short list]," Mr Strawbridge.

That may also give the local bidders an edge in the process.

 

[melb78]

any of them tired up with SQ owners or with Etihad

 

[jakeseven7]

The FIRB point is about the extra time it would take - time VA may not have. From the article:
Lead administrator Vaughan Strawbridge said foreign bidders may require Foreign Investment Review Board approval, wihch could drag out the time table.

"There potentially are parties that do require FIRB approval and that will dictate on how many parties we take forward. At this point, we would expect to be no more than three [bidders on the short list]," Mr Strawbridge.

That may also give the local bidders an edge in the process.

Sure, but if it’s the best outcome/bid there is no way the government would accept a headline ‘VA1 collapses due to slow foreign review process, 7000 jobs gone’.

Just won’t happen.

They will tick and flick*

*Excluding a possible China wildcard but honestly I think the Feds won’t even care about that, they’d serve VA up on a platter to Russia these days just to get rid of them!

 

[Spongbob]

...and how is that in any way relevant to the current VA1 administration?

There was an inference that the failure for VA International to be profitable was unusual, and thus VA2 should not fly international segments.

 

[TheInsider]

any of them tired up with SQ owners or with Etihad

AFAIK, no.

 

[oz_mark]

If his ‘aha moment’ was that late in the game, it’s not a glowing endorsement for his job application to run VA2!

I don't know. In the middle of March I think there were many (perhaps even most) people who had not really appreciated the depth and length of what was about to happen. At the time, I remember people bagging Ardern for the lockdown, people still comparing it to the flu, people posting on Facebook about keeping it in perspective.

Many subsequently changed positions..

Actually has PS actually formally confirmed he will be going for CEO of VA2?

He wants to, but is ultimately someting that the new owner will decide.

 

[hydrabyss]

I don't know. In the middle of March I think there were many (perhaps even most) people who had not really appreciated the depth and length of what was about to happen. At the time, I remember people bagging Ardern for the lockdown, people still comparing it to the flu, people posting on Facebook about keeping it in perspective.

Many subsequently changed positions..

I was totally surprised when they started shutting borders to international travellers but understood it had to be done. But when it came to state borders I was thinking there is no way that will happen due to the financial cost to business but I did not take into account the Government taking such a big financial gamble with the economy. Hopefully it will work and not backfire and send us back to the early 90's or worse.

 

[Borisdog]

I was totally surprised when they started shutting borders to international travellers but understood it had to be done. But when it came to state borders I was thinking there is no way that will happen due to the financial cost to business but I did not take into account the Government taking such a big financial gamble with the economy. Hopefully it will work and not backfire and send us back to the early 90's or worse.

I'm somewhat glad that the Government gambled with the economy rather than our lives

 

[RooFlyer]

Sure, but if it’s the best outcome/bid there is no way the government would accept a headline ‘VA1 collapses due to slow foreign review process, 7000 jobs gone’.

Just won’t happen.

They will tick and flick*

*Excluding a possible China wildcard but honestly I think the Feds won’t even care about that, they’d serve VA up on a platter to Russia these days just to get rid of them!

Agree except the last line. With VA already overseas owned/controlled, FIRB approval would almost be automatic - as has happened with offshore offers for offshore-owned 'Australian' companies. As you say, there would be a 'security'/ 'national interest' test which might throw up some hurdles if the offeror or even operator is 'iffy'. I don't think the Feds wold gratuitously waive that, though. The Administrator, hopefully, will recognise these issues and keep a 'fall back' party 'warm' (or two!) after allowing the final one to go ahead. This is a normal practice anyway - there are lots of reasons why deals fall over at the last minute.

 

[melb78]

we all should know in a few days who the 3 will be as long it is not the mod from Inigo

 

[oz_mark]

I would also keep in mind that the Govt has employed an emissary to keep an eye on things, and perhaps guide things.

 

[jakeseven7]

Agree except the last line. With VA already overseas owned/controlled, FIRB approval would almost be automatic - as has happened with offshore offers for offshore-owned 'Australian' companies. As you say, there would be a 'security'/ 'national interest' test which might throw up some hurdles if the offeror or even operator is 'iffy'. I don't think the Feds wold gratuitously waive that, though. The Administrator, hopefully, will recognise these issues and keep a 'fall back' party 'warm' (or two!) after allowing the final one to go ahead. This is a normal practice anyway - there are lots of reasons why deals fall over at the last minute.

I think given VA1’s previous mixed bag of foreign government backed entities, links to dubious characters and foreign states - that the Australian government clearly didn’t care about - means they won’t care about almost anything again this time around with VA2. Now if it was Qantas, completely different story!

 

[antycbr]

I would also keep in mind that the Govt has employed an emissary to keep an eye on things, and perhaps guide things.

And to make sure the Administrators don’t go too far down the path with an option that is unacceptable to the Fed Gov.

The feds are in a tricky spot as they can’t go to the Administrator and tell them that certain options are not “suitable” and then demand a “market based solution” publicly. This administration leaks like a ship anyway so that wouldn’t stay secret long. Creditors would rightly point out the prior foreign ownership of VA as a precedent. Having Nicholas Moore in the negotiations is trying to keep a lid on this.

 

[melb78]

I have a feeling BGH with Aust super my be the winner here just my 2 cents Worth

 

[jakeseven7]

And to make sure the Administrators don’t go too far down the path with an option that is unacceptable to the Fed Gov

Struggling to see (in reality) what that unacceptable option would be really...
VA1 was almost majority Chinese owned before - and that seems like the only potential lightning rod at the moment.

Would the Feds care if the Indians won out with IndiGo, for example?

 

[tomlee1986]

Struggling to see (in reality) what that unacceptable option would be really...
VA1 was almost majority Chinese owned before - and that seems like the only potential lightning rod at the moment.

Would the Feds care if the Indians won out with IndiGo, for example?

As you probably know, VA1 was almost majority owned by Hainan air, I can say that airline is in serious trouble financially before COVID 19