Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Quickstatus]

I contend it makes it cheaper to buy a carcass than a viable business on life support.

Let it fall over, buy the AOC and other critical bits, build a completely new balance sheet and restart from there.

 

[tomlee1986]

I contend it makes it cheaper to buy a carcass than a viable business on life support.

Let it fall over, buy the AOC, build a completely new balance sheet.

I totally agree... too much old baggage so to speak with VA 1 - better to let it die, and restart afresh

 

[RooFlyer]

I contend it makes it cheaper to buy a carcass than a viable business on life support.

I totally agree... too much old baggage so to speak with VA 1 - better to let it die, and restart afresh

I agree that assets are probably the better buy, but the Administrator is charged with getting the best outcome for creditors. It would require a 'conspiracy' between the potential offerors for everyone not to make an offer. I'm not sure if that's illegal or not, but its unlikely to happen.

 

[tomlee1986]

I agree that assets are probably the better buy, but the Administrator is charged with getting the best outcome for creditors. It would require a 'conspiracy' between the potential offerors for everyone not to make an offer. I'm not sure if that's illegal or not, but its unlikely to happen.

Sometimes the best outcome is to let it fall.. not saying if its legal or not... the administrators of course would act in the best interest of the creditors, sometimes i heard they would recommend such option

 

[jakeseven7]

. September seems like a smart time, start of a new quarter and gives them time to get ready for re-start.

Precisely the point You personally have nominated September for example. Great - a 'firm date'!
Who else has agreed to that - No one.
The uncertainty and all the states not aligning is causing harm to the prospects of a restart and sale.

 

[HappyFlyerFamily]

Who in their right mind buys something burning an alleged $15m per week?

Need those expenses suspended or controlled further while Virgin can’t earn revenue.

Jobkeeper helps in respect of employee’s wages.

 

[Quickstatus]

It would require a 'conspiracy' between the potential offerors for everyone not to make an offer

The value goes down daily with the cash burn which is augmented by the border lockdowns. The highest bidder will try to get it for the cheapest price possible and only needs to bid $1 above the second highest bidder. The Admin will try to get the best deal out of the ones on offer - but he is limited by time and residual cash.

Who in their right mind buys something burning $15m per week?

It is most attractive as a charred carcass. Get the carcass which will have minimal cash burn, then rebuild slowly as the circumstances allow.
QLD Govt is just trying to insert itself into the mix so it can negotiate with the winning bidder.

 

[HappyFlyerFamily]

The value goes down daily with the cash burn which is augmented by the border lockdowns. The highest bidder will try to get it for the cheapest price possible and only needs to bid $1 above the second highest bidder

Yes a proverbial $1 more. But if you paid less but offered creditors more cents in the dollar, you might be the winner.

 

[p--and--t]

Yes a proverbial $1 more. But if you paid less but offered creditors more cents in the dollar, you might be the winner.

Theoretically couldn't a bidder offer $1 for the airline and make an offer to the creditors they couldn't/wouldn't refuse.

 

[Quickstatus]

But if you paid less but offered creditors more cents in the dollar

Theoretically couldn't a bidder offer $1 for the airline and make an offer to the creditors they couldn't/wouldn't refuse.

They have to first submit a bid directly with the Administrator who represents the creditors. The creditors are not allowed to individually deal with each bidder. It is illegal for a creditor to take payment ahead of other creditors.

The bidders can structure their bids anyway they like but all the creditors get to vote on the bids. Essentially money goes from bidder to creditors How much is the question

I suspect the balance sheet is zero or negative. The remaining cash just keeps it on life support.
The assets are worth something and the secured creditors will get something back. The unsecured will be nothing.
The question is whether its a firesale liquidation price or higher.

 

[BNEFlyer]

The uncertainty and all the states not aligning is causing harm to the prospects of a restart and sale.

Considering VA have been flying through the lockdown and NSW, Victoria and NT don't have border restrictions and there's a government representative included in the negotiations, I'm not sure that all the states not aligning right now is definitely causing harm to the prospects of a restart and sale. If it did there wouldn't be any interested parties.

 

[ja1]

I think if they don’t open soon there will be a constitutional challenge as the health issue is no longer justification for the closures. S 92 of the constitution covers this from a trade perspective. Pauline Hanson is threatening it already.

As per discussion on ABC radio the other day - good luck with a High court challenge. It will be months if not years before you'd get a hearing. There's a reasonable chance this is all done and dusted well before the High court has a chance to rule on it.

Pauline Hanson is doing what she does best (and what any politician would do) - making noise and getting attention and media coverage. However I haven't seen any actual signs of an actual court case being filed anywhere..

 

[p--and--t]

However I haven't seen any actual signs of an actual court case being filed anywhere..

....and I bet there won't be

 

[ja1]

They have to first submit a bid directly with the Administrator who represents the creditors. The creditors are not allowed to individually deal with each bidder. It is illegal for a creditor to take payment ahead of other creditors.

The bidders can structure their bids anyway they like but all the creditors get to vote on the bids. Essentially money goes from bidder to creditors How much is the question

I suspect the balance sheet is zero or negative. The remaining cash just keeps it on life support.
The assets are worth something and the secured creditors will get something back. The unsecured will be nothing.
The question is whether its a firesale liquidation price or higher.

Can anyone summarise what the actual assets are worth and what they are ?

Yes the AOC is worth something.. but what are the actual tangible assets ? does VA actually own anything significant ? (planes? buildings?)

 

[HappyFlyerFamily]

They have to first submit a bid directly with the Administrator who represents the creditors. The creditors are not allowed to individually deal with each bidder. It is illegal for a creditor to take payment ahead of other creditors.

The bidders can structure their bids anyway they like but all the creditors get to vote on the bids. Essentially money goes from bidder to creditors How much is the question

I suspect the balance sheet is zero or negative. The remaining cash just keeps it on life support.
The assets are worth something and the secured creditors will get something back. The unsecured will be nothing.
The question is whether its a firesale liquidation price or higher.

Informative.

Would you or anyone else know where Velocity’s loan sits? Secured or unsecured?

 

[ja1]

I totally agree... too much old baggage so to speak with VA 1 - better to let it die, and restart afresh

Disagree - VA (well, VB) took months, if not years.. to scale up.

And 'better' for whom ? the new company ? but worse for the existing creditors, bondholders, existing customer base, employees, suppliers ?

I would have agreed possibly with 'simpler' to start again - but 'better' is subjective..

Even a transfer of an AOC would be a lot of work compared to an existing organization with all the processes and documentation in place.. (and an impeccable safety record).

 

[travel_bug]

Fed Court has issued new orders stating that the administrators are also not liable for any debts to the Commonwealth due to any overpayment of JobKeeper.

Virgin Australia: fresh call for government bailout as stricken airline's cash reserves dwindle

Ahead of a meeting of key creditors, administrators are discussing options with the federal government

www.theguardian.com

Haven't been able to locate Wednesday's orders yet via Deloitte's VA website, but there are some interesting orders from 15 May...
More personal liability exemptions including from alliance agreements and loans made by Virgin Companies to other Virgin Companies. I imagine that would cover the Velocity loan should it fail to be discharged completely even with its security.

https://www2.deloitte.com/content/dam/Deloitte/au/Documents/finance/insolvency/virgin/deloitte-au-fa-virgin-order-150520.pdf

 

[BNEFlyer]

Disagree - VA (well, VB) took months, if not years.. to scale up.

And 'better' for whom ? the new company ? but worse for the existing creditors, bondholders, existing customer base, employees, suppliers ?

I would have agreed possibly with 'simpler' to start again - but 'better' is subjective..

Even a transfer of an AOC would be a lot of work compared to an existing organization with all the processes and documentation in place.. (and an impeccable safety record).

Agree, the worst possible scenario is for VA to be liquidated and the new owner start again. It'd months if not years until the new airline was up and running at the level that VA is already at.

 

[Quickstatus]

Disagree - VA (well, VB) took months, if not years.. to scale up.

And 'better' for whom ? the new company ? but worse for the existing creditors, bondholders, existing customer base, employees, suppliers ?

I would have agreed possibly with 'simpler' to start again - but 'better' is subjective..

Even a transfer of an AOC would be a lot of work compared to an existing organization with all the processes and documentation in place.. (and an impeccable safety record).

Under current economic conditions there is no rush to scale up
VA original (VB) was able to get flying within months not years
Worse for creditors? - Bidders have no concern for the interest of creditors.

While everyone is doing a distracted sticky beak at the VA crash and burn, no one is looking at who is coming in out of left field (I have no intel) .

AirNZ- what are they doing? Whats to stop AirNZ setting up an AirNZ Aus subsidiary?

 

[ja1]

Informative.

Would you or anyone else know where Velocity’s loan sits? Secured or unsecured?

The velocity buyback was funded by a bond issuance which is currently ranked as CAA1 I think (i.e junk).

So I'd be taking an informed guess that it's unsecured by anything (i.e it is a junior unsecured loan compared to any senior loan..)

The value of the bond (which paid 8.25%) seems to be about $16 at the moment (issued at $100) so you can see that the market currently thinks the best case is getting back ~15% of your original capital/loan..