“The assets” let’s look at them.
- A brand recognised throughout Australia. I will call that Marketing capital.
- A business conglomerates of staff and operational processes and systems (including IT and HR) that ensure Virgin is a going concern, even if it is hibernating now.
- Supplier/creditor/customer channels that are mature and workable.
- An AOC and the systems and capability to maintain the same.
- Airport chech in facilities and infrastructure around Australia.
- A considerable market share of domestic travel.
- Motivated and attractive workforce (in the marketing sense)
Folks, non of this stuff came cheap. None of this stuff carries a book value, no matter what accounting principles Deloittes dreams up. There is the core of the argument between Bain, Deloittes and the bond holders in my opinion.
- Bain is naturally trying to get ownership by paying for the rusty filing cabinets and office chairs - with the rest thrown in for free.
- The Bond holders see the reverse - the huge value of the non financial assets compared to the financial debt - which after all is just money that can and will be supplied by anyone, any time and quickly.
- Deloittes, being a bunch of accountants, however you want to put it, cannot and will not appreciate the non financial assets. In addition, I have observed repeatedly that there is precisely ZERO forensic aviation accounting talent outside Qantas and Virgin, so Deloittes are in the dark about the value of much of Virgin.
My assumption is that Deloittes have been rolled by Bain. Deloittes don’t have the skills to work on this scale, Bain does this every day of the week.
‘’So here is my conclusion: The Bain deal is secret because it values the REAL assets of the business at virtually zero and if it saw the light of day, anyone with aviation experience would know it and realise that Deloittes have been comprehensively outplayed by Bain, who stand to make billions out of Deloittes stupidity. This in itself is no sin, but my concern is that the Bain deal will leave Australia worse off on many levels.
I saw a similar situation when Saint Margaret Jackson and Geoff Dixon presided over the attempted privatisation of Qantas. They characterised Qantas as a rusty old beat up Holden ready for the wreckers. The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
So to be optimistic for once, if Virgin got some financial breathing space, courtesy of the bond holders, an enlightened Board who actually have relevant experience instead of being politically correct dummies and a tough but intelligent and fair management - again not steeped in politically correct bull****, then a restructured Virgin has a good future.