Virgin Australia Financially Secure? [Now in Voluntary Administration]

[PPS_SYD]

What I don't get is why the vote is set for mid August. Given that Deloitte will pick the candidate in 6 days, is there any reason why they can't put the vote for around mid July?

 

[antycbr]

What I don't get is why the vote is set for mid August. Given that Deloitte will pick the candidate in 6 days, is there any reason why they can't put the vote for around mid July?

I thought they need to negotiate on an exclusive basis all of the new contracts etc with the lessors etc and other trade creditors, and also there'd be statutory provisions for the timeline, i.e. giving a certain amount of notice for the meeting and giving creditors time to review the proposal.

 

[jakeseven7]

More on the bondholders bid:


BONDHOLDERS BREAK COVER TO LAUNCH VIRGIN COUP

Virgin Australia’s bondholders have broken cover to launch their sensational attempt to wrestle control of the airline from the two remaining bidders.

Sydney advisory Faraday Associates lodged the proposal with administrator Deloitte at 7am on Wednesday, which will involve offering $800 million to recapitalise the business and $125 million to keep it alive during the administration process. Bain immediately hit back with a new offer to Virgin’s staff.

The public reveal, which came far earlier than anticipated, landed just days after the bidding process officially ended at 10am on Monday, with remaining US investors Bain Capital and Cyrus Capital Investment submitting their final offers.

Faraday Associates, which is representing bondholders, said in a statement, “Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline.

Full article:

Bondholders break cover to launch Virgin coup

The offer will involve $800 million to recapitalise the airline and $125 million to keep the business alive during the administration process.

australianaviation.com.au

 

[moa999]

The unions have rejected the last minute bondholder attack..... So I guess that ends that!

Would think the bondholders have more power here given where they sit in the credit structure.

It's closer to what happened to Norwegian airline, though in that case both lessors and bondholders ended up with equity.

It was never going to be a simple process.

 

[moa999]

Virgin's bondholders revealed

The (virtual) attendance list at Virgin's last creditor meeting offers clues as to which institutions hold a portion of the airline's $2 billion in bond debt.

www.afr.com

Not sure if you're able to access that Gold60, however according to this article there are a number of fund and asset managers, names include FIIG, Yarra Capital Management, Crestone, Morgans, Realm Investment Management and a number of others

As part of the purchase of Velocity they issued institutional bonds (some of the above) as well as the VAHHA listed bonds some of which went to mum and dad's as well

 

[RooFlyer]

Creditors vote their preference / unions etc so Deloitte's preference is irrelevant as I see it ??

Deloitte should present its analysis of the two final bidders to creditors and possibly a recommendation with reasons. Creditors not bound to accept any recommendation, so yes, the Administrator's 'preference' if not irrelevant, isn't binding.

Given that Deloitte will pick the candidate in 6 days,

Again, I don't think they 'pick a candidate' but will present a recommendation - but I guess they will be obliged to defend their recommendation against the other final bidder.

 

[woodborer]

Deloitte should present its analysis of the two final bidders to creditors and possibly a recommendation with reasons. Creditors not bound to accept any recommendation, so yes, the Administrator's 'preference' if not irrelevant, isn't binding.



Again, I don't think they 'pick a candidate' but will present a recommendation - but I guess they will be obliged to defend their recommendation against the other final bidder.

My understanding is that Deloitte will be selecting a preferred bidder by next Tuesday

 

[jakeseven7]

Deloitte should present its analysis of the two final bidders to creditors and possibly a recommendation with reasons. Creditors not bound to accept any recommendation, so yes, the Administrator's 'preference' if not irrelevant, isn't binding.



Again, I don't think they 'pick a candidate' but will present a recommendation - but I guess they will be obliged to defend their recommendation against the other final bidder.

So Deloitte couldn't present the bondholder pitch even if they thought it was the best?

So the bondholders have to pick off all the unions etc themselves and seperately?

 

[RooFlyer]

So Deloitte couldn't present the bondholder pitch even if they thought it was the best?

So the bondholders have to pick off all the unions etc themselves and seperately?

I have no idea what the Administrator can and can't do , but as with the bidder who stepped out of the process then invited themselves back in, I'd find it extraordinary if the Admistrator ran this formal process, costing everyone squillions, then let some interloper party in. I would also find it extraordinary that the bond holders pitch could be any way well informed, given (I think) they didn't have access to the data room; that itself would give Deloittes a good reason to ignore it, even if it appeared the best.

Yes, I understand that a third party could pitch to the creditors etc separately, as was proposed for that other bidder (I've already forgotten their name ). In fact, I'm thinking on getting on the phone and making a pitch myself. I'll promise the world* .

* terms and conditions apply.

 

[jase05]

More on the bondholders bid:


BONDHOLDERS BREAK COVER TO LAUNCH VIRGIN COUP

Virgin Australia’s bondholders have broken cover to launch their sensational attempt to wrestle control of the airline from the two remaining bidders.

Sydney advisory Faraday Associates lodged the proposal with administrator Deloitte at 7am on Wednesday, which will involve offering $800 million to recapitalise the business and $125 million to keep it alive during the administration process. Bain immediately hit back with a new offer to Virgin’s staff.

The public reveal, which came far earlier than anticipated, landed just days after the bidding process officially ended at 10am on Monday, with remaining US investors Bain Capital and Cyrus Capital Investment submitting their final offers.

Faraday Associates, which is representing bondholders, said in a statement, “Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline.

Full article:

Bondholders break cover to launch Virgin coup

The offer will involve $800 million to recapitalise the airline and $125 million to keep the business alive during the administration process.

australianaviation.com.au

And I see Temasek are involved with the bondholders

 

[33kft]

And I see Temasek are involved with the bondholders

It's a pretty tenuous link

Broad Peak, a hedge fund backed by Singapore's sovereign wealth fund Temasek, is among the 30 institutions leading the bondholders' recapitalisation proposal for Virgin Australia.

Broad Peak is a hedge fund in which Temasek has an investment. By the same token, I am probably involved in a bid for Virgin too, by way of superannuation holdings.

 

[ja1]

There was also an article in The Australian talking about the bond holders who were happy to take an 8% return but are now complaining about not having some form of bailout and that their retirement savings are at risk. I would have thought that the advisory firm that recommended VA bonds to retail 'mums and dad' investors should be deregistered.

Technically they are getting an 8% return. Unfortunately that's the return of capital as opposed to the return ON capital..

 

[Franky]

I am conscious of copyright. Summary of key points:


Bain has the funds to complete the sale with $25bn whereas Cyrus are still scrambling to find it; deep investment into tech to bring up to the QF level and detailed research from Bain Consulting down to the route level plus 6000 VA customers surveyed are all seen as key benefits of the Bain bid.

Branson is expected to chip in for a 10% stake.

I thought he was broke?...

 

[Franky]

There was an article a few weeks ago about all of VA’s failed international routes and failed domestic route strategy (mostly regional) and they talked a lot about lack of analytic / data grunt at VA1 in really getting down into the data and looking at the numbers of route and equipment feasibility to profitably expand. Perhaps Bain have also uncovered this weakness....?

If you don’t know your numbers you don’t know your business and it’s very clear VA1 from JB onwards did not have a strong handle of this, from all angles.




There is obviously a very good chance that whoever buys VA1 will flip it in 3-5 years... let’s just hope they can build a commercially sustainable model in the meantime...

My former boss at the Credit Union where I worked for over 25 years used to say ‘you are what you measure’...

 

[jakeseven7]

I thought he was broke?...

Oh no, you misundersood! He was broke when his old company VA1 was calling out to be saved BEFORE administraion.

Now its actually collapsed into administration and his very namesake is at threat (sorry namesake = franchise royalty payments worth millions a year) he has suddenly become un-broke and wants to buy back into the new VA2 after leaving VA1 to rot - so he can keep his royalty payments churning along.

Clearer?

 

[Franky]

I did think something along those lines, but don’t understand how that was possible...

 

[jase05]

Oh no, you misundersood! He was broke when his old company VA1 was calling out to be saved BEFORE administraion.

Now its actually collapsed into administration and his very namesake is at threat (sorry namesake = franchise royalty payments worth millions a year) he has suddenly become un-broke and wants to buy back into the new VA2 after leaving VA1 to rot - so he can keep his royalty payments churning along.

Clearer?

My understanding was that he was prepared to put more money into VA1 but not the amount that was needed to save them. Think he offered $200m or similar.

 

[RooFlyer]

So Deloitte couldn't present the bondholder pitch even if they thought it was the best?

I would also find it extraordinary that the bond holders pitch could be any way well informed, given (I think) they didn't have access to the data room; that itself would give Deloittes a good reason to ignore it, even if it appeared the best.

Looks like my '(I think)' re Bondholders exposure to information wasn't correct. From today's Oz:

They expressed interest in the airline on May 15, put in a non-binding offer at the end of May, entered the data room on June 11, and have sat through presentations by Virgin management.

The amorphous group, comprising 6000 overwhelmingly Australian retail investors and 30 institutions with about $11 trillion under management, are owed $2.1bn.

They also happen to be the effective owners of Virgin now that the equity is worthless.

In a nutshell, the plan is to engineer a debt-for-equity swap, inject about $800m to get Virgin ready for takeoff, a further $125m to tide it over until the creditors’ meeting, and then pay creditors a handsome 70c in the dollar compared to the debt’s secondary market value of about 10c.

I still can't see how their offer would be fully informed though and being allowed to enter the process would obviously be objected to by the other two offerors, who may legalise against the Administrator, or threaten it.

 

[ja1]

I still can't see how their offer would be fully informed though and being allowed to enter the process would obviously be objected to by the other two offerors, who may legalise against the Administrator, or threaten it.

Does it matter if a particular group is 'fully informed' ? They may be confident enough in their understanding of what's needed to proceed without being fully informed. They may have other sources of data that mean they are possibly more informed than other bidders.. This isn't a standard retail offering after all..

At the end of this process the Administrator's role is to achieve the best outcome first and in the process to have followed some due process... I would suggest if a new bidder showed up at the very last minute and offered $200m more than everyone else they are going to consider it..

There's no such term of 'legalise' but I think you were adverbing (!) 'may take legal action against'. It's certainly not uncommon to attempt to apply pressure but the administrator is protected against this in many cases (which unhappily is why you can also see a number of examples of egregious conduct BY administrators which are then difficult to pickup and prosecute because of these defences)

It's all a large chess game with moves and countermoves and implied threats. In reality what would legal action against administrators achieve as by the time that's sorted out it's very unlikely to allow for a reversal or rerun of the sale process and it seems unlikely you'd be getting punitive damages out of the administrator anyway.

 

[Melburnian1]

Two articles in business section of 'The Australian' on Thursday 25 June.

The minor one is about how 'surprise move (of bondholders) adds turbulence and how the 9000 staff aren't impressed. Steve Purvinas (interesting record with other things in the past) says there could be legal action and the whole shebang fall over.

The major one is 'bond holder bid shakes Virgin.'

While it repeats the material above ($125m upfront to administrators and a further $800m capital injection being the bondholders' suggestion), later on it tals not only about VA being kept as a publicly listed company but also discusses in detail Singapore Airlines and Temasek.