Lucas Baird Reporter Jul 9, 2020 – 5.05pm
Virgin Australia's administrators from Deloitte have launched a broadside against bondholders and have warned they are jeopardising the future of the airline through their efforts to disrupt the sale.
The bondholders at the centre of the dispute are Broad Peak Investment Advisers, which has close links to Singapore's sovereign wealth fund Temasek, and the Hong Kong-based Tor Investment Management.
The pair, which hold about $300 million of Virgin's unsecured bonds,
have applied for a rare Takeovers Panel intervention into the administration process and
access to confidential sale documents over the past week.
Broad Peak and Tor, which are the flagbearers for the wider bondholder group advised by financial services outfit Faraday and lawyers from Corrs Chambers Westgarth, want their alternative recapitalisation proposal put to a vote by the 12,000 or so creditors still owed about $6.8 billion by Virgin.
But according to submissions they filed to the Federal Court on Thursday afternoon, the pair have faced cautions that their actions could derail the entire administration.
"The Respondents [Deloitte] and Bain have submitted to the Takeovers Panel that the effect of this limited relief would be to precipitate the liquidation of VAH by undoing or delaying the implementation of the terms of the SID [sale and implementation deed]," the document says.
The panel – a national forum for resolving disputes related to corporate acquisitions – was the first route through which Broad Peak and Tor sought relief.
On Monday, they applied for orders from the forum that would force Deloitte to disclose the terms of the sale to Bain and enable creditors to vote on the bondholder proposal.
The Takeovers Panel has yet to determine whether it will conduct proceedings on this matter.
And just two days later, Broad Peak and Tor applied to unlock the details of the sale – such
as how much Bain paid and the expected return to creditors – which remain secret on orders from the Federal Court.
Virgin's administrators attacked these actions in their response to these submissions, telling the court that the bondholder's application should be thrown out with costs for several reasons.
"To the extent that the applicants [the bondholders] are disappointed bidders or participants in the competitive sales process it would be unorthodox and highly prejudicial to provide them with the Confidential Material," the administrators said referring to the failed bondholder bid.
"The Proposed Extension Orders and the Proposed Disclosure Orders will cause disruption to, and potentially jeopardise, the orderly sale process that has been implemented by the administrators."
No basis for warning, bondholders say
In their earlier court filings, Broad Peak and Tor said there was no basis for the warning from Deloitte and Bain that the sale may fall over.
"Those submissions are unconnected with the nature of the relief sought or the consequences of an alternative proposal being put to the second meeting of creditors," Broad Peak and Tor's submission said.
This meeting, which will take place in mid-August, is where creditors traditionally vote on the outcome of the administration – whether to liquidate or sell to a preferred bidder.
Yet, what precisely Virgin's creditors will vote on at their meeting is unclear given Deloitte has already signed away the airline to Bain.
Bain remains in conversations with the Virgin management team on what the reincarnated airline will resemble; however,
it will likely be a heavily slimmed-down version with up to 5000 staff facing the axe.
Virgin's administrators have said they picked this option because it provided the most certainty for the business going forward.
Still, the bondholders –
of which there are nearly 6000 owed close to $2 billion – expressed their disappointment with it when announced late last month.
The bondholder group's proposal for the airline would see their unsecured debt converted to equity, about $1 billion pumped into the airline and relist Virgin on the securities exchange.
Virgin Australia fell into administration in April, unable to weather the harsh initial toll of the COVID-19 pandemic. The outbreak has crushed travel demand and global aviation since early February.
Even Qantas, one of the best-resourced airlines in the world,
has sacked 6000 workers and pulled the trigger on a $1.9 billion capital raising to help it through what it expects will be three years of reduced demand.