Originally Posted by
Sunfish
I am a conservative, definitely not a socialist and I think Anne Appelbaum’s opinion is correct.
So what exactly is
Eileen Appelbaum’s opinion? It seems to just boil down to 'Bain bad'. And to form that opinion she draws on what, her extensive experience in executive management, corporate finance and banking? No, she has none of that. While I have no doubt that Ms Appelbaum is intelligent near as I can tell she has never been employed outside of academia. She has no first hand business experience, certainly none in the last 45 years anyway.
That aside, on this particular deal, she opines that,
"If things begin to recover, you can imagine that Bain would sell the aeroplanes to a leasing company and then Virgin Australia will have to rent the aeroplanes back and Bain will walk off with whatever they sold it for,"
Just how much does she think 40 second hand B738s are going to fetch in a post-COVID market? In case she's missed the news there's a glut of commercial aircraft sitting around at the moment. Boeing are sitting on at least 200 cancelled MAX orders right now so the second hand narrow body market isn't going to be shooting the lights out any time soon.
If you get down to the bottom of the ABC article Appelbaum admits that Bain’s Virgin deal is different from Toys R Us. Toys R Us was a leveraged buyout of a business with a reasonable balance sheet and Bain were just one of the players in that buyout. The business itself was being squeezed in the traditional shop front retail market by Walmart and the likes and were also coming under pressure from every bricks-and-mortar retailer's worst nightmare, Amazon.
Toys R Us may not have been destined to fail but it certainly wasn't a lay down misere that it would be an ongoing success story. Of course, Ms Appelbaum doesn't mention the fact that after the Bain, KKR, Vornado buy-out, Toys R Us remained profitable for another 8 years. It was only in 2014 that it started to run into trouble. That was around the time that toy sales in the US started to flatten and decline while Amazon's share of that market started to take-off.
In any event, the Virgin deal is about as different as you can get.
Are Bain going to make money out of this deal? That is most assuredly their plan. But we need look no further than the Cyrus-Flybe deal to understand that sometimes those plans don't come to fruition.
In the meantime though they are keeping a business with around 6,000 employees afloat.