Originally Posted by
Sunfish
Virgin doesn’t get to (a) default on its bonds, then (b) borrow money from the Federal Government, Bain or anyone else and eventually pay those creditors back without paying out the original bond holders first.
Under an administration they most certainly get that option so long as there is a Deed of Company Arrangement between the two events. If the DOCA states that bondholders are getting X cents in the dollar to satisfy Virgin's obligations to them and the DOCA is passed then the bonds issue is done. What the business does subsequently is no longer a matter for the bond holders - their dealings with the business are done.
Originally Posted by
Sunfish
To put that yet another way, if Virgin defaults on its bonds, then borrows two billion from Bain and then pays interest on those monies out of its revenues that is potentially technically illegal under Pari Passu..
That's not correct so long as there is an approved DOCA between the two events.
Originally Posted by
Sunfish
They bond holders are within their rights to demand to discover the details of the deal ...
That is not correct. That matter was unequivocally resolved by Justice Middleton on Friday when he dismissed the bondholders' application to be given access to the details of the Bain proposal, with costs awarded against them.
Originally Posted by
Sunfish
As a general rule, to extinguish the bond holders rights, the company must be liquidated and the bond holders paid out what little remains.
A DOCA binds all unsecured creditors, even if they voted against the proposal. Virgin's bond issue specifically contemplates 'winding up, liquidation, compromise, arrangement, or other insolvency process' as potential default mechanisms for resolving bond holder's claims.
Despite all the hoopla the bond holders are in weak position. They are unsecured creditors who only have neither sufficient numbers nor value to either block a DOCA nor have one of their own approved. They represent about 37 percent of the creditors by number and less than 30 percent by value. At least one of those numbers needs to be greater than 50 percent to influence the outcome of a creditors' vote.
All Bain require is for the secured creditors as a block to vote in favour of their DOCA. Even if every other creditor votes against the Bain DOCA, as the secured creditors represent a majority by value, the vote would be split between value and number. In that case the Administrator casts the deciding vote. That will be in favour of the DOCA. All over, red rover.