I’ll have a crack.
The value of Virgins parts are worth much less than it is as a whole after a bit of surgery. This is important because it puts liquidation further down creditor preferences.
So, it is possible all creditors, not just the unsecured bondholders, may be prepared to accept a write down of some of the debt. Maybe as a trade for new equity? Maybe a haircut is the only option. It’ll be a negotiation. Virgin might be “saved” because instead of having $7B in debt, it may move forward with $3B. Some of the reductions will be write downs, some won’t exist such as a result of cancelled lease agreements, some won’t be needed such as employee redundancy provisions. The DOCA will specify it all if that’s the path forward.
However, the Deloitte administrator recently commented they “probably have the assets for employee entitlements.” Not a great advertisement of their financial position. There is no guarantee the Virgin brand will remain. It’s looking shaky especially if there is an agreement whereby private equity buy the liquidated assets and simultaneously do a deal with existing secured creditors to guarantee their votes.
It has to be acknowledged the opposing desires of the potential new owners and existing creditors. Obviously the existing creditors want the biggest return, but the new owners want minimal liabilities. St Nick is there for a reason too. The distressed private equity specialists will find the politics too much trouble when there are numerous competing equity options without similar interference.