Virgin Australia to be sold to Bain Capital

[jakeseven7]

A news article yesturday from Singapore reported that VA's bondholders have ran to a firm owned by 'Temasek Holdings' to do/negotiate the infamous repetitive "Singapore to taek ovah VA !!!!111!" deal..

To stop private equity sale, Virgin Australia bondholders launch rival proposal involving Temasek-backed S'pore hedge fund

SYDNEY — Virgin Australia bondholders lodged a last-ditch recapitalisation proposal for the struggling airline on Wednesday (June 24), seeking to recoup more of their investment and stop its sale to a US private equity firm.

www.todayonline.com

So does this mean Star Alliance if the bondholders manage to tip Bain over

 

[HS-TQE]

So Virgin name will probably remain, but not confirmed.
Future of PS is a maybe, with Jayne lurking in the background!

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MORE DETAILS EMERGE AS BAIN WINS VIRGIN BY DEFAULT

Full story

Breaking: Bain on brink of Virgin deal as Cyrus withdraw

US investors Cyrus said it pulled out due to a “lack of engagement” with the administrator which had “not returned calls, emails or meaningfully engaged”.

australianaviation.com.au

There's also the possibility that Jayne could replace Beth as VAH chairman with PS staying on as CEO.

 

[eastwest101]

The challenge is to have a field of tyre kickers in the dataroom isn't straightforward. Firstly some of them may be fronts for your competitors (Rex, QF, even NZ) and secondly the process is already tight, organising meetings with the VA management/exec team to the level required would have stretched the process out.

Yep - its all probably moot now because Bain are going to be the only successful bidder.

I'm interested in your comments about possible "tyre kickers"/time wasters/competitors, you can have an "entry fee" to the data room or you specifically exclude them if its likely that the FIRB or ACCC would exclude them from being successful (e.g. Qantas or a Chinese state owned enterprise). But other than that, why would you want to exclude lots of other bidders, I would expect that as the data room opens and the magnitude of the problem becomes clearer that many parties will either drop out or combine their efforts into a few large syndicates or joint venture bids that spread the risk and have the capital to recapitalise the new business? Especially if you give them time to plan this?

I understand your point about how time intensive it can be, because there has to be discussions with Virgin management and lots of other stakeholders like employees, aircraft leasors, airport owners, business partners etc, but given we don't have state borders even open yet, let alone any idea of international borders being reopened, and the industry is essentially shut down for a bare minimum schedule of Federal Government assistance flights and most of the workforce are on JobKeeper until Sept, then it seems that mabye Deloitte may have rushed the process a little too quickly to produce a good outcome? But if Deloitte wanted a fast outcome, why didn't they just get all the bidders in and pull a bidder name out of a hat at random? Would have been just as quick and maybe even cheaper and faster than the process that eventuated?

Anyway - once Bain do have unencumbered unchallenged ownership and the keys to the business then the real truth telling and the "real" negotiation can begin with everyone who is going to be taking a haircut, such as aircraft leasors, bond holders, airport owners, Velocity, Branson's licence fees, potential partner airlines, employees and unions, ground handling and catering contractors, freight partners etc etc, Will be interesting to see if Bain keep existing management around including Paul Scurrah or whether they go for a big clean-out and are prepared to lose a lot of corporate knowledge/memory...

 

[flydoc]

Well, the Creditors still have to decide/vote on whether to accept the offer put to them by the Administrator.

From the Administrators’ release to the ASX, they appear to regard the second creditors meeting as just a formality:

“The Administrators are pleased to confirm that they have now entered into a Sale and Implemetation Deed with Bain Capital which WILL (my emphasis) result in the sale and recapitalisation of the businesses of VAH.”

 

[Alpha7]

Virgin Australia administrators have agreed to sell the airline to Bain Capital.

The airline was put into voluntary administration on April 20.
On Friday, US-based private equity group Cyrus Capital Partners withdrew its offer for Virgin Australia, leaving Bain Capital as the sole bidder.

Winning offer: Virgin Australia to be sold as bid accepted — 7NEWS.com.au

The airline's new owner has set out a clear plan for a range of matters, including employee entitlements, travel credits and Velocity frequent flyer booked flights.

apple.news

 

[ja1]

I think Deloitte has stuffed it up big time if they it is true that they have not returned phone calls or emails to Cyrus but has kept engaged with Bain Ove the last few days then Deloitte should have a good kick up the butt. plus they should bring out a statement asap.

It is not uncommon that where you have a 'front runner' that you engage with them and don't engage with the group running second. The trick is usually to keep the second group from finding this out and it looks like Cyrus discovered this and decided to be aggressive in its response (and it had nothing to lose from its POV as it knew by this point it was not going to get over the line, so it had to do something different)

 

[jakeseven7]

Yep - its all probably moot now because Bain are going to be the only successful bidder.

Anyway - once Bain do have unencumbered unchallenged ownership and the keys to the business then the real truth telling and the "real" negotiation can begin with everyone who is going to be taking a haircut, such as aircraft leasors, bond holders, airport owners, Velocity, Branson's licence fees, potential partner airlines, employees and unions, ground handling and catering contractors, freight partners etc etc,

Will be interesting to see if Bain keep existing management around including Paul Scurrah or whether they go for a big clean-out and are prepared to lose a lot of corporate knowledge/memory...

One could argue with the sustained poor performance of the business that the loss of some of their 'corporate knowledge and memory' could be exactly what is required for VA2 to be successful...

Its a bit of a culture juxtaposition, they wanted to be fun, awesome to work for but weren't laser focused on costs. The new VA2 is going to have to adopt the QF style of cost management (in whatever form they take) to be successful....

 

[desafinado74]

From a selfish point of view, i do hope that the new owners will retain the Velocity - Krisflyer and Flybuy - Velocity transfer programs. And, i hope VA 2 will be similar to a Jet Blue model.

 

[HS-TQE]

From a selfish point of view, i do hope that the new owners will retain the Velocity - Krisflyer and Flybuy - Velocity transfer programs. And, i hope VA 2 will be similar to a Jet Blue model.

It would depend what agreement VA mk 2 and SIA draws up from the not too distant future onwards.

There's very little doubt that SQ will codeshare with VA in a new arrangement (perhaps under a revised scaled back network), but I suspect the points transfer will probably be gone as SIA will no longer be part-owners of VAH once the sale is finalised.

 

[hossein_au]

Well to be fair to Cyrus, if Deloitte gave any indication that they would consider the 11th Hour Bondholders bid, then the inference could be made that Deloitte may not be following their own rules and conditions in the process, and if thats the case, why not lob in a better/sweeter offer? As you say - gamesmanship abounds. Very short term thinking producing a suboptimal outcome for everyone.

Probably also an excellent example of why you never ever have a shortlist process that excludes bidders, and especially a process that narrows it down to 2 short listed bidders, because it only takes something to go wrong with one bidder, or malfeasance of one bidder, and you have lost all your competitive tension...... thats a stupid way to get the best deal possible for creditors/vendors/owners.

Why didn't Deloitte just run an open data room, give a simple timeline with a hard deadline then have period of no shop no talk, accept and clarify all bids (ignore any bids after the deadline) and then produce a list, then go through the list until the creditors find something acceptable to them? Any departure from a transparent process is just asking for a legal challenge from any unsuccesul bidders, and you dont want to start the process all over again because of an administrative bungle.

Now, that would be logical, wouldn't it? But I've come to expect anything but logical these days...

 

[daft009]

He says Virgin Mark II will have about about 5000 to 6000 employees and 60 or 70 planes operating when it resumes operations in September. Its head office will stay in Brisbane as part of an agreement with Queensland Investment Corporation.

Murphy describes the new-look Virgin as being positioned similar to where it is now but with less emphasis on servicing the elite who use business club lounges.

From Reborn Virgin pivots to value over lounges

surely they wouldn't close the gold lounges?!?
perhaps the ones to compete with QF CL lounge I would think?

 

[jakeseven7]

From Reborn Virgin pivots to value over lounges

surely they wouldn't close the gold lounges?!?
perhaps the ones to compete with QF CL lounge I would think?

Surely they just mean closing 'The Club' lounges? If they shut the basic VA lounges it would literally hand every single premium pax back to QF on a platter.

 

[RooFlyer]

From the Administrators’ release to the ASX, they appear to regard the second creditors meeting as just a formality:

“The Administrators are pleased to confirm that they have now entered into a Sale and Implemetation Deed with Bain Capital which WILL (my emphasis) result in the sale and recapitalisation of the businesses of VAH.”

If there is no other qualification to it, I find that statement very ... bold. I can't see how the creditors can be treated as a rubber stamp. If, for ANY reason the deal falls over, then I wonder how the Administrators will go defending making a misleading/untruthful statement to the ASX?

I read the statement as a bit of chest-puffery and self-congratulation by Deloittes, but the wording seems foolhardy to me.

 

[jakeseven7]

, but I suspect the points transfer will probably be gone as SIA will no longer be part-owners of VAH once the sale is finalised.

That will be a HUGE deal for a lot of old VA1 flyers.

And given VA2 is unlikely to have little/no international presence apart from NZ potentially - isn't it important for them to still maintain international partners....?

Redeeming SQ award seats (well any international seats with any partner) was near impossible via Velocity Mark 1, thats why I always transferred out to KrisFlyer...

 

[HS-TQE]

That will be a HUGE deal for a lot of old VA1 flyers.

And given VA2 is unlikely to have little/no international presence apart from NZ potentially - isn't it important for them to still maintain international partners....?

Redeeming SQ award seats was near impossible via Velocity Mark 1, thats why I always transferred out to KrisFlyer...

It was likely that both bidders still wanted partners in some form, but not likely under the current arrangements in the VA1 form. Codeshare/FF/lounge redemption is as far is it'll go for some partners.

I suspect the DL/SQ/EY partnerships, being the "Big 3" partnerships of VA1 will be amongst the first to be renegotiated before the others. Whilst at the same time I wouldn't rule out alternate partners such as NH or even the one-time enemy UA (depending on the negotiations with DL).

 

[Carrots]

The way the article/comment reads is they're referring to The Club, not Lounges.

When Murphy mentions fancy clubs he is referring to the strategy of former Virgin CEO, John Borghetti, who rolled out special Virgin Clubs at airports in Sydney, Melbourne, Brisbane, Perth and Canberra. There are 4000 Velocity members entitled to use them."

It's technically correct to say little to no international presence is likely, but it needs to be added that this is the short term plan given current conditions. Bain (like Cyrus) have previously postured towards a 787 order to simplify the fleet. Hell it could actually be a good time to trade in / hand back the 777s with Boeing whilst they have deliveries pushed back on current 787 orders.
Realistically it's a who knows scenario mind you given we have no idea what the future of international travel looks like at present.

Likewise their commentary of 60-70 planes and 5000-6000 staff from September could be taken with a pinch of salt given the way things are at present. This could mean circa 50 737s and the full fleet of F100s continuing in the regional space.

Does anyone have a Crystal Ball? I'd like the answers and also the Powerball winning numbers please (happy to share the $50m 50/50 with you!)

 

[desafinado74]

That will be a HUGE deal for a lot of old VA1 flyers.

And given VA2 is unlikely to have little/no international presence apart from NZ potentially - isn't it important for them to still maintain international partners....?

Redeeming SQ award seats was near impossible via Velocity Mark 1, thats why I always transferred out to KrisFlyer...

It will be a big deal for me. I only use Velocity for SQ J/F redemptions via the Krisflyer transfer program. I currently have 136K Velocity points and Close to 300k Flybuys points , which I use to transfer to Velocity. Sure, my amount is loose change compared to many on this forum, but it will still suck if i can't use Velocity points for SQ redemptions.

 

[BCons]

60-70 planes likely means whole routes will be cut, not just reduced scheds. VA2 will look at places like Tas, Hamilton Isl or Broome and many others, and conclude its not worth servicing at all (no lounges to close either..) And with jetstar being QF's cheapest operation, that will mean Jetstar only for a lot of locations.

As a longtime QFF who left because of the jetstar-ization of QF's Tas services, thats a rather galling prospect.

 

[antycbr]

I think there'll be a lot of whinging on this forum about specific cuts and changes, however we need to be thankful that we don't have a repeat of Ansett on our hands (well it's looking promising but I'll be happier in late August after the Creditors meeting).

The fact that someone, indeed anyone, was prepared to step up and recapitalise VA is something we should be truly thankful for, given the close to $7B in debt the airline has collapsed under.

There will be pain ahead, but there is at least someone interested in stepping up and providing some assistance to the many thousands of staff and millions of customers affected by the collapse of VA mark 1.

 

[jakeseven7]

60-70 planes likely means whole routes will be cut, not just reduced scheds. VA2 will look at places like Tas, Hamilton Isl or Broome and many others, and conclude its not worth servicing at all (no lounges to close either..) And with jetstar being QF's cheapest operation, that will mean Jetstar only for a lot of locations.

As a longtime QFF who left because of the jetstar-ization of QF's Tas services, thats a rather galling prospect.

Yup there will 100% be route cuts and obviously reduced schedules.

Tasmania - I suspect they will dump LST completely (maybe keep a token 1 MEL flight a day....) and then all HBA routes except MEL and run reduced frequency there. They weren't doing that well in Tassie, it was a 'red zone' apparently.

But rather that then no competition at all right?