Virgin Australia to be sold to Bain Capital

[equus]

It is far from all over. The Administrator may be all chest puffed and confident that the deal will go ahead, and the creditors will rubber stamp it, but trimming the $7B in debt will only occur if a DOCA is approved - and the creditors have to approve this.

Everyone seems to think that the Administrators have the final say, and can simply sell the airline - which they could do, but only with all the debt in place. For the debt to be shaved, they have to through the DOCA route - and that needs the creditors to agree. Without creditor agreement, then nothing is going to happen.

The bondholder's proposal won't be able to be ignored, simply because they have such a large proportion of the unsecured debt that they can make it very difficult for any alternative to be approved. Even if their proposal isn't completely serious or even feasible, and is simply trying to leverage a better return, as much as the Administrator would like them to go away, they can't ignore them (why do you think they actually got access to the data room?)

 

[HS-TQE]

Bain's plans for VA Mk 2 (Source: Executive Traveller).

For now it'll be a mid-market 737 only airline with Domestic and eventually NZ/Pacific Islands to follow.

A330s will be returned to lessors and like with QF's long-haul fleet, the 77Ws will be mothballed until 2021.

Jayne in frame to be Chairperson (if not board member) as Bain has recognised strong staff and union support for Scurrah to remain as CEO of VAH.

Link: Here's what Bain Capital's Virgin Australia 2.0 will look like

 

[HappyFlyerFamily]

Doesn’t anyone have a clear (slightly more detailed) picture of what Bain intends to do?

Number of employees surviving, route so surviving, etc?

OR do we have to wait until much closer to the creditors meting when a summary is given to them?

Edit: should have added how much secured and unsecured creditors get?

 

[Bagpuss]

The bondholder proposal is part of a playbook. I doubt pouring in just under $1bn would have been enough for the airline to operate in the mid to long term.
Cyrus was a concern from the start. The amount of money under their management is what they would have needed to complete the purchase.
Bain was probably one of the most obvious from the start and some information reflected they are happy to pour in money already to keep it operating until the August creditors meeting.
The media coverage is mainly just a playbook, when the crunch comes at the creditors meeting they will go with the Bain offer.
There's no such thing as a happy voluntery administration process. Even surving they will also preech rule 1 never go into administration.

 

[Dr Ralph]

Did they win?

How do you define 'win'?

 

[Bagpuss]

Doesn’t anyone have a clear (slightly more detailed) picture of what Bain intends to do?

Number of employees surviving, route so surviving, etc?

OR do we have to wait until much closer to the creditors meting when a summary is given to them?

Creditors meeting will cover what creditors will get.
Virgin Australia will be a private company if all goes ahead which I expect it will. They won't release anything into the public which they don't want. Hence private company.

 

[Melburnian1]

In 'The Oz' online on arvo of Friday 26 June, Brisbane stockbroking form Morgans is quoted as suggesting:

'...Travel stocks are the biggest candidates for earnings disappointment in the coming reporting season, according to Morgans.

Analysts at the group say “no investor alive has seen this type of rates outlook nor this scale of monetary and fiscal stimulus”.

They say travel stocks including Flight Centre and Webjet, along with AMP, Treasury, Origin and Bingo Industries are the most at risk..'

Yet Morgans is the (major?) group behind the VA bond issue involving about 6000 holders, who are now screaming because they may receive little back.

The Morgans sentiments don't augur well for VA as it's also closely tied in with 'tourism.'

Another just posted report in 'The Oz' (at about 1500 hours) claims Bain has allocated about $1.7 billion to pay unsecured creditors though.

 

[Jurahn]

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?

I'm certainly hoping they keep at least some flights in and out of HBA - I haven't flown QF for years (and never would again, if given the choice) but won't be left with any option if VA(v2) dumps Tassie from the schedules altogether.

 

[AIRwin]

Shame new posts here can no longer continue the previous thread on voluntary administration, otherwise it could have been bigger than Bain-hur...

 

[jakeseven7]

Shame new posts here can no longer continue the previous thread on voluntary administration, otherwise it could have been bigger than Bain-hur...

LOL by far the biggest thread that ever happened in the VA forum which was normally like *crickets* when VA1 was around...

Pity it had to happen but who knows, long term could be be the best thing for VA2...

 

[antycbr]

LOL by far the biggest thread that ever happened in the VA forum which was normally like *crickets* when VA1 was around...

Pity it had to happen but who knows, long term could be be the best thing for VA2...

It'll be like the heady days of 2011-2013 when VA launched from DJ and we got new features, like lounges. and a real business class!

 

[Must...Fly!]

So is Bain aware of the existence of the F100 and A320 fleet which fly a mix of RPT and charter (the latter at guaranteed profit)? Because I've seen zero mention of it, anywhere.

Some cash generating flying can not be served by 737s...

 

[jakeseven7]

So is Bain aware of the existence of the F100 and A320 fleet which fly a mix of RPT and charter (the latter at guaranteed profit)? Because I've seen zero mention of it, anywhere.

Some cash generating flying can not be served by 737s...

They've repeatedly said 737 only..... maybe they plan just to chuck all the F100 flying over to Alliance?

It'll be like the heady days of 2011-2013 when VA launched from DJ and we got new features, like lounges. and a real business class!

But like, the opposite?

 

[Bagpuss]

So is Bain aware of the existence of the F100 and A320 fleet which fly a mix of RPT and charter (the latter at guaranteed profit)? Because I've seen zero mention of it, anywhere.

Some cash generating flying can not be served by 737s...

I would say they have as VARA is in VA.

However, I think with an ageing F100 and potential headaches coming soon they will partner with Alliance on FIFO (which is an agreement they kind of already have) and have Alliance fly on their behalf / codeshare (in line with the current agreement) to some destinations such as Perth > Broome / Kalgoorlie / Newman Kununurra etc in WA and Sydney > Canberra / Coffs etc.

Simply they will take a small profit from these routes whilst focused on key domestic trunks.

In turn I expect the ACCC to insit Qantas sell their shares in Alliance.

 

[Melburnian1]

This is part of an article available (paywalled) on 'The Australian' site from about 1700 hours on Friday 26 June 2020:

'Bain Capital is going to inject $600m cash into Virgin Australia to help get things up and running as part of a deal struck on Friday to takeover the airline.
While no details of the deal have been released, The Australian understands that Bain will begin to inject capital into the airline from as early as next week as part of the agreement struck with administrator Deloitte’s Vaughan Strawbridge.

Bain is understood to have proposed an initial cash injection of $1.75bn as part of the deal, including $600m to meet travel credits, $600m cash up front, and another $450m to cover employee entitlements.

This will be in addition to taking on other liabilities including aircraft leases.

No details are available on how much the $2bn in unsecured bond holders will get from the deal.

The bond holders lodged their own bid for Virgin this week in a bid to boost their potential payout.

The private equity bidder Bain is believed to have plans to begin laying off Virgin staff in the next few weeks. While it is expected that Virgin will have to cut back staff from its current 9000, expectations are that it will move quickly to take a tough line with the airline’s workers given its cash burn rate...'

---------------------

In these circumstances, bearing in mind the creditors have yet to approve the deal, how does Bain decide 'who stays' and 'which staff are made redundant?' Does it delegate that to its either rehired or newly appointed managers at VA 2.0?

 

[jakeseven7]

This is part of an article available (paywalled) on 'The Australian' site from about 1700 hours on Friday 26 June 2020:

'Bain Capital is going to inject $600m cash into Virgin Australia to help get things up and running as part of a deal struck on Friday to takeover the airline.
While no details of the deal have been released, The Australian understands that Bain will begin to inject capital into the airline from as early as next week as part of the agreement struck with administrator Deloitte’s Vaughan Strawbridge.

Bain is understood to have proposed an initial cash injection of $1.75bn as part of the deal, including $600m to meet travel credits, $600m cash up front, and another $450m to cover employee entitlements.

This will be in addition to taking on other liabilities including aircraft leases.

No details are available on how much the $2bn in unsecured bond holders will get from the deal.

The bond holders lodged their own bid for Virgin this week in a bid to boost their potential payout.

The private equity bidder Bain is believed to have plans to begin laying off Virgin staff in the next few weeks. While it is expected that Virgin will have to cut back staff from its current 9000, expectations are that it will move quickly to take a tough line with the airline’s workers given its cash burn rate...'

The unions have been awfully quiet..... They see Bain coming for them?

So this is interesting, some unions rejected the bondholders approach, most siding with Cyrus.... some campaigned against Bain.... so what do they do now?

 

[dajop]

I would say they have as VARA is in VA.

However, I think with an ageing F100 and potential headaches coming soon they will partner with Alliance on FIFO

This is exactly how US regional services operate. Smaller regional aircraft (mainly RJ's) are by and large operated by separate (independent) companies under contract, and the independents often contract to more than one major airline.

 

[HappyFlyerFamily]

This is part of an article available (paywalled) on 'The Australian' site from about 1700 hours on Friday 26 June 2020:

'Bain Capital is going to inject $600m cash into Virgin Australia to help get things up and running as part of a deal struck on Friday to takeover the airline.
While no details of the deal have been released, The Australian understands that Bain will begin to inject capital into the airline from as early as next week as part of the agreement struck with administrator Deloitte’s Vaughan Strawbridge.

Bain is understood to have proposed an initial cash injection of $1.75bn as part of the deal, including $600m to meet travel credits, $600m cash up front, and another $450m to cover employee entitlements.

This will be in addition to taking on other liabilities including aircraft leases.

No details are available on how much the $2bn in unsecured bond holders will get from the deal.

The bond holders lodged their own bid for Virgin this week in a bid to boost their potential payout.

The private equity bidder Bain is believed to have plans to begin laying off Virgin staff in the next few weeks. While it is expected that Virgin will have to cut back staff from its current 9000, expectations are that it will move quickly to take a tough line with the airline’s workers given its cash burn rate...'

---------------------

In these circumstances, bearing in mind the creditors have yet to approve the deal, how does Bain decide 'who stays' and 'which staff are made redundant?' Does it delegate that to its either rehired or newly appointed managers at VA 2.0?

So if Bain injects cash, then if creditors refuse even with no other choice, then how would Bain get money back?

 

[jakeseven7]

So if Bain injects cash, then if creditors refuse even with no other choice, then how would Bain get money back?

Initiate a chargeback?

Or would VA only offer them a ‘conditional credit’

 

[RooFlyer]

The reports in the Oz about Bain taking over some things in the airline as soon as next week and putting cash in soon too, may indicate that my previous assumption that the deal had to be cleared by the Creditors at their meeting might be incorrect.

But then they report:

Bain is not expected to take over the airline legally until September, but it is expected to step up its involvement in the running of the airline from next week.

I guess as it was voluntary Administration, the Administration can put in 'managers' as they like; and if the new managers can put in first-ranking secured loans into the company, then it might go as reported.