Government Loan to Virgin Australia
I think the hard line on preserving ‘as many jobs as possible’ and ‘keeping the airline in its current form’ could potentially be more dangerous than say dropping the axe now and moving on, albeit smaller.
We are all for keeping jobs and so on, of course we don’t want people sacked, but if it drags on and on and on, and on, post June, it gets to the point where everyone is out of a job, due to some narrow minded view.
What is most disturbing is the comment that the process is on ‘Virgin Management’s’ agenda’. They need to rid themselves of this Management and start again. It seems Virgin’s Management team will be selecting the winning bidder. Won’t be Bain then, as Carla would wipe them all out.
We are all for keeping jobs and so on, of course we don’t want people sacked, but if it drags on and on and on, and on, post June, it gets to the point where everyone is out of a job, due to some narrow minded view.
What is most disturbing is the comment that the process is on ‘Virgin Management’s’ agenda’. They need to rid themselves of this Management and start again. It seems Virgin’s Management team will be selecting the winning bidder. Won’t be Bain then, as Carla would wipe them all out.
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‘More cash, please’, says Virgin Australia, as it apparently struggles to keep ......
Above article Quote/Extract here:
So (should 'that' be so) in the 'Real' world of Straws/& Camels (it is 'In' a constituted "Voluntary" Administration process, at 'this' time), is 'this' starting to get into the vector of 'freaky'/+ some- yet.....?????
Given- , the 'said' term Solvency and all that goes with that, on more than 1x level/s-
ASIC link here: https://asic.gov.au/regulatory-resou...for-directors/
Extract here:
Just a question.....
Rgds all
S28- BE
"Virgin Australia is understood to have reached out to the federal government on Monday night for emergency funds to keep the airline in operation until the conclusion of the sales process, say sources."
Given- , the 'said' term Solvency and all that goes with that, on more than 1x level/s-
ASIC link here: https://asic.gov.au/regulatory-resou...for-directors/
Extract here:
"An insolvent company is one that is unable to pay all its debts when they fall due for payment. The law prescribes serious penalties for allowing your company to trade while insolvent. You should consult an appropriately qualified specialist insolvency accountant or lawyer, a financial advice service or a registered liquidator about your company’s financial situation as soon as possible if you suspect that you or your company cannot pay debts when they are due."
Rgds all
S28- BE
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If there is no cash, there is no cash and the government would be foolhardy to put anything into Virgin. The administrators know that this is there only very tiny window of opportunity to get any return on the dollar, and if that fails then it's all over and a new entrant will rise from the ashes. All that those circling the remains of Virgin need to do is wait - the price will be much less once the receivers move in.
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We are all in this 'together' ! Secured, Unsecured ..etc!!
https://www.afr.com/companies/transp...0200519-p54ugi
https://www.afr.com/companies/transp...0200519-p54ugi
Any 'Cut & Paste' solution/action- at your disposal..?? or a summary thereof.......
Rgds- ("Gas turbine blades of conventional rotorcraft turboshaft engines.....")
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Sharp/preemptive/intuitive.................. Cool.
So having read the article-
Can we deploy all these various reserves/cash (encumbered or not)/equity/funding options (spoken of on numerous occasions) to meet the debts as and when they fall due.......????- Yes or No
ta/Rgds
S28
So having read the article-
Can we deploy all these various reserves/cash (encumbered or not)/equity/funding options (spoken of on numerous occasions) to meet the debts as and when they fall due.......????- Yes or No
ta/Rgds
S28
Last edited by Section28- BE; 19th May 2020 at 10:34. Reason: read the article............
What is most disturbing is the comment that the process is on ‘Virgin Management’s’ agenda’. They need to rid themselves of this Management and start again. It seems Virgin’s Management team will be selecting the winning bidder. Won’t be Bain then, as Carla would wipe them all out.
It seems that high on the list of assessment criteria for the sale is 'Buys into Virgin v2.0 (Full service domestic + international +LCC Qantas Mini-Me) business model (aka the Scurrah-Strawbridge Delusion). And you get the sense that 'Retains current management team' is also towards the top of the criteria along with 'Minimises job losses'. Pesky stuff like the financials hasn't been getting much in the way of airplay.
In terms of the financials you can run the numbers on the back of napkin to get a feel for what this deal has to looks like.
Any prospective new owner buying into 'the Delusion' is going to have to be able to take on about $3 billion in debt and liabilities. That will be comprised of $1.5 billion of the currently $2.3 billion in secured debt plus around $1 billion in leases (roughly half of the current $1.9 billion). The other half billion is the employee entitlements that will simply be rolled over as a liability.
Then there's what needs to be stumped up in cash. If you're going to continue trading with the current landlords and supplier base, you are not going to be able to stiff them on what was owing when the business went into administration. That's $235 million. The unsecured bond holders aren't going to take much less than 20 cents on the dollar, so that's another $400 million. So, that's the best part of $650 million just to open the doors again.
You then have the vexed matter of recapitalising the business. That will be about $1 billion in cash or cash equivalents plus sufficient float to cover a very likely first year loss. If the new owner decides to honour the travel credits issued the loss could easily run to $500 million; if they don't they might squeeze by with a loss in the double-digit millions, it just depends on how much they bleed market share by not honouring the credit vouchers.
So the deal looks like $5 billion in cash and debt and that's before you even think about buying out the current equity. One dollar sounds like the right price but I suspect it could go up to around the $100 million mark.
Call the deal $5 billion and change.
It is probably instructive that the crowd with half a trillion under management, Brookfield, walked away on Monday. They were being advised by Virgin's former Chief Financial Officer. I wonder if they know something the rest of us don't.
Any old how, from a financial perspective, Bain could probably manage the $5.x billion. A deal like this would double Cyrus's assets under management so, short of finding a deep-pocketed partner, they'd have to struggle to make the cut I would think. It would also be a stretch for Indigo. BGH would also struggle to come up with $5 billion unless it lent heavily on AustralianSuper (and I'm trying to picture what that investment case would look like - it would have to be heavily weighted towards making a return on a subsequent public float).
Back on the philosophy criteria, BGH is the only proponent likely to buy into 'the Delusion' and look to retain Scurrah and Co. Cyrus and Indigo would not go near that business model. Bain might but I doubt it, and in any event Bain would be handing Schettino and the bridge crew their hats just as quickly as the could replace them.
I think that this thing will quickly come down to whether BGH can fund the transaction. That in turn comes down to whether AustralianSuper will stump up the required coin. And it's likely that Bain, Cyrus and Indigo will pretty quickly join the dots on how important embracing 'the Delusion' is to a successful outcome (probably the day that they meet with management and the unions) and realise that their money is better spent elsewhere.
And now, there's the added complication of whether the administrator has enough cash to run the sale process while remaining solvent. Like all good circuses there's plenty to see ... and no shortage of clowns.
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Why would anyone buy the debt now, when it will no longer be a factor if receivers are appointed and firesale the assets to a new starter. Everyone is too focused on a resurrection rather than a genuine re-birth.
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It's a decidedly odd administration, that's for sure. A bit like having Captain Schettino managing the Costa Concordia's salvage operation.
It seems that high on the list of assessment criteria for the sale is 'Buys into Virgin v2.0 (Full service domestic + international +LCC Qantas Mini-Me) business model (aka the Scurrah-Strawbridge Delusion). And you get the sense that 'Retains current management team' is also towards the top of the criteria along with 'Minimises job losses'. Pesky stuff like the financials hasn't been getting much in the way of airplay.
In terms of the financials you can run the numbers on the back of napkin to get a feel for what this deal has to looks like.
Any prospective new owner buying into 'the Delusion' is going to have to be able to take on about $3 billion in debt and liabilities. That will be comprised of $1.5 billion of the currently $2.3 billion in secured debt plus around $1 billion in leases (roughly half of the current $1.9 billion). The other half billion is the employee entitlements that will simply be rolled over as a liability.
Then there's what needs to be stumped up in cash. If you're going to continue trading with the current landlords and supplier base, you are not going to be able to stiff them on what was owing when the business went into administration. That's $235 million. The unsecured bond holders aren't going to take much less than 20 cents on the dollar, so that's another $400 million. So, that's the best part of $650 million just to open the doors again.
You then have the vexed matter of recapitalising the business. That will be about $1 billion in cash or cash equivalents plus sufficient float to cover a very likely first year loss. If the new owner decides to honour the travel credits issued the loss could easily run to $500 million; if they don't they might squeeze by with a loss in the double-digit millions, it just depends on how much they bleed market share by not honouring the credit vouchers.
So the deal looks like $5 billion in cash and debt and that's before you even think about buying out the current equity. One dollar sounds like the right price but I suspect it could go up to around the $100 million mark.
Call the deal $5 billion and change.
It is probably instructive that the crowd with half a trillion under management, Brookfield, walked away on Monday. They were being advised by Virgin's former Chief Financial Officer. I wonder if they know something the rest of us don't.
Any old how, from a financial perspective, Bain could probably manage the $5.x billion. A deal like this would double Cyrus's assets under management so, short of finding a deep-pocketed partner, they'd have to struggle to make the cut I would think. It would also be a stretch for Indigo. BGH would also struggle to come up with $5 billion unless it lent heavily on AustralianSuper (and I'm trying to picture what that investment case would look like - it would have to be heavily weighted towards making a return on a subsequent public float).
Back on the philosophy criteria, BGH is the only proponent likely to buy into 'the Delusion' and look to retain Scurrah and Co. Cyrus and Indigo would not go near that business model. Bain might but I doubt it, and in any event Bain would be handing Schettino and the bridge crew their hats just as quickly as the could replace them.
I think that this thing will quickly come down to whether BGH can fund the transaction. That in turn comes down to whether AustralianSuper will stump up the required coin. And it's likely that Bain, Cyrus and Indigo will pretty quickly join the dots on how important embracing 'the Delusion' is to a successful outcome (probably the day that they meet with management and the unions) and realise that their money is better spent elsewhere.
And now, there's the added complication of whether the administrator has enough cash to run the sale process while remaining solvent. Like all good circuses there's plenty to see ... and no shortage of clowns.
It seems that high on the list of assessment criteria for the sale is 'Buys into Virgin v2.0 (Full service domestic + international +LCC Qantas Mini-Me) business model (aka the Scurrah-Strawbridge Delusion). And you get the sense that 'Retains current management team' is also towards the top of the criteria along with 'Minimises job losses'. Pesky stuff like the financials hasn't been getting much in the way of airplay.
In terms of the financials you can run the numbers on the back of napkin to get a feel for what this deal has to looks like.
Any prospective new owner buying into 'the Delusion' is going to have to be able to take on about $3 billion in debt and liabilities. That will be comprised of $1.5 billion of the currently $2.3 billion in secured debt plus around $1 billion in leases (roughly half of the current $1.9 billion). The other half billion is the employee entitlements that will simply be rolled over as a liability.
Then there's what needs to be stumped up in cash. If you're going to continue trading with the current landlords and supplier base, you are not going to be able to stiff them on what was owing when the business went into administration. That's $235 million. The unsecured bond holders aren't going to take much less than 20 cents on the dollar, so that's another $400 million. So, that's the best part of $650 million just to open the doors again.
You then have the vexed matter of recapitalising the business. That will be about $1 billion in cash or cash equivalents plus sufficient float to cover a very likely first year loss. If the new owner decides to honour the travel credits issued the loss could easily run to $500 million; if they don't they might squeeze by with a loss in the double-digit millions, it just depends on how much they bleed market share by not honouring the credit vouchers.
So the deal looks like $5 billion in cash and debt and that's before you even think about buying out the current equity. One dollar sounds like the right price but I suspect it could go up to around the $100 million mark.
Call the deal $5 billion and change.
It is probably instructive that the crowd with half a trillion under management, Brookfield, walked away on Monday. They were being advised by Virgin's former Chief Financial Officer. I wonder if they know something the rest of us don't.
Any old how, from a financial perspective, Bain could probably manage the $5.x billion. A deal like this would double Cyrus's assets under management so, short of finding a deep-pocketed partner, they'd have to struggle to make the cut I would think. It would also be a stretch for Indigo. BGH would also struggle to come up with $5 billion unless it lent heavily on AustralianSuper (and I'm trying to picture what that investment case would look like - it would have to be heavily weighted towards making a return on a subsequent public float).
Back on the philosophy criteria, BGH is the only proponent likely to buy into 'the Delusion' and look to retain Scurrah and Co. Cyrus and Indigo would not go near that business model. Bain might but I doubt it, and in any event Bain would be handing Schettino and the bridge crew their hats just as quickly as the could replace them.
I think that this thing will quickly come down to whether BGH can fund the transaction. That in turn comes down to whether AustralianSuper will stump up the required coin. And it's likely that Bain, Cyrus and Indigo will pretty quickly join the dots on how important embracing 'the Delusion' is to a successful outcome (probably the day that they meet with management and the unions) and realise that their money is better spent elsewhere.
And now, there's the added complication of whether the administrator has enough cash to run the sale process while remaining solvent. Like all good circuses there's plenty to see ... and no shortage of clowns.
As I've said before love your work, think it's as good as any on the forums.
Question I'd have - and maybe already asked in a similar way - as the whole show seems to be deteriorating at a great rate of knots how long before the administrator (deloittes) places the whole thing into liquidation to ensure the administrator (deloittes) do not incur costs against themselves...as apparently in administration they're meant to be controlling the finances therefore are responsible for the same??
What - if anything - would be the trigger??
Cheers
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But does a rebirth require a new AOC? (another 12 months...)
Canberra saying no I guess. Which they did the previous ten times I don’t see why last night would have been any different.
What - if anything - would be the trigger??
Cheers
Cheers
Definitely not my area of expertise but if Virgin is liquidated, the AOC goes with it, doesn't it? That's one of, if not the overwhelming attractions of maintaining the business as a going concern; you preserve the AOC.
One thing I missed above was Temasek's reported tie up with BGH. That might make the funding easier to manage.
Question I'd have - and maybe already asked in a similar way - as the whole show seems to be deteriorating at a great rate of knots how long before the administrator (deloittes) places the whole thing into liquidation to ensure the administrator (deloittes) do not incur costs against themselves...as apparently in administration they're meant to be controlling the finances therefore are responsible for the same??
What - if anything - would be the trigger??
Cheers
What - if anything - would be the trigger??
Cheers
I think that Deloitte would have some well articulated risk management guidance and thresholds that would be relevant in a circumstance like this.
Perhaps the thing that would be front of mind for Deloitte is their assessment of just how doable a sale is. They've got to come up with a deed of company arrangement that is amenable to a buyer. At the end of the day the sale will only occur if they can get the debt to a position that a buyer is happy with. That means corralling the creditors. They should already have a sense of the creditors' opening positions on what they'll accept. Having just received non-binding offers they'll have a view as to prospective buyers' appetites for debt. There'll be a gap between the two positions and Deloitte should have a professional view as to whether that gap can be closed such that a deal is possible. They'll have an evolving view as to whether they're in the Go Zone for a deal. If they ever get too far out of that zone they'll have to call time.
The fact that Deloitte are already rattling their cup and we're only just into the short-list phase of the sale process does not augur well. The fact that the bidders know that Deloitte is rattling the cup does not augur well. Same same with Brookfield walking early.
Equally worrying is the way this thing is playing out as a public spectacle. Generally speaking the most successful commercial deals are the ones that you read about for the first time after they've concluded. Clearly Deloitte can't run this whole thing under the radar given that Scurrah ran the lead up to the administration in full view but Deloitte have got to try to get the machinations out of the papers for at least a couple of days at a time.
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I think that Deloitte would have some well articulated risk management guidance and thresholds that would be relevant in a circumstance like this.
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Today they want $238m. Who knows what the figure will be tomorrow.
Virgin Australia administrators eye $238m in restricted cash to help keep the airline flying
https://www.google.com/amp/s/amp.the...2a4f82ea621f31
Restricted cash - how can they access it if it is restricted? Surely it’s “restricted” for a reason.
Who deems it restricted? The company, law or the administrators?
All seems a little prickly to me?
Who deems it restricted? The company, law or the administrators?
All seems a little prickly to me?
From today's The Australian
https://www.theaustralian.com.au/bus...7s/news-story/
'Mr Scurrah outlined how the airline could prosper by ditching its hodgepodge fleet of aircraft for a line-up of Boeing 737s.' From Mr Oblivious to Captain Obvious. I wonder if there was a phone booth and a costume change involved? It would have been interesting to watch Paul Scurrah explaining to Bill Franke how an airline should be run.
Separately, the emergence of Australia Connected Aviation Partners can't be good for Deloitte's hit-and-run sale process. If ACAP can get the bondholders on board Deloitte could very easily be well and truly out of cash before a sale can be finalised.
https://www.theaustralian.com.au/bus...7s/news-story/
Scurrah urges Virgin reboot with 737s
By ROBYN IRONSIDE12:00AM MAY 22, 2020
Virgin Australia CEO Paul Scurrah has told prospective buyers of the carrier the best way forward is to rebuild the business as a domestic airline with a strong frequent-flyer program.
The 20-year-old airline went into voluntary administration on April 20 with debts of $6.8bn, sparking a flood of interest from prospective buyers.
Four bidders were short-listed on Monday including Bain, BGH Capital, Indigo Partners and Cyrus Capital.
In a series of three-hour presentations to two of the bidders on Thursday, with two to follow on Friday, Mr Scurrah outlined how the airline could prosper by ditching its hodgepodge fleet of aircraft for a line-up of Boeing 737s. The domestic network could be rebuilt from scratch focusing on high-demand, lucrative routes, while international services and low-cost carrier Tigerair would be “optional extras”.
Costly contracts with Wi-Fi providers and caterers would be up for negotiation, presenting opportunities for significant savings.
As Mr Scurrah outlined the possibilities for Virgin 2, administrator Deloitte hosted the first committee-of-inspection meeting with 35 creditor representatives including unions, airports, banks, bondholders and suppliers. They were told of the increasing urgency for further funding to keep Virgin Australia flying. With government subsidies for flights due to come to an end on June 11, administrators revealed they were exploring various avenues for financial assistance including state governments and commercial lenders.
Although an existing $100m in cash was expected to see the airline through till the end of July, concern centred on Virgin Australia’s ability to ramp up to keep pace with rival Qantas. The meeting heard administrators were eyeing up to $238m in restricted cash, tied up against hedging and in merchant and credit card facilities.
Failing that, Deloitte also suggested to the committee one of the final two bidders could enter into some funding arrangement before settlement — precisely the scenario that scared off Brookfield.
It also emerged on Thursday that a group of restructuring experts calling itself Australia Connected Aviation Partners approached Virgin Australia’s administrator last week with a plan they believed best protected the interests of creditors in the administration process.
ACAP is being bankrolled by American entrepreneur Augie Fabela, the co-founder of the New York Stock Exchange-listed VEON, the seventh largest mobile phone operator in the world boasting $US22bn ($33.5bn) in revenues. Mr Fabela was also the chairman of the Koenigsegg Group, which acquired Swedish vehicle maker Saab more than a decade ago from General Motors.
In the ACAP team are three former EY partners who have started their own turnaround services business known as Spiique, which last year worked with *Deloitte’s Vaughan Strawbridge on the rescue of Axsesstoday, a publicly listed SME lender that went into voluntary administration.
Also in ACAP’s ranks is Dermot Mannion — former CEO at Aer Lingus and deputy chairman of Royal Brunei Airlines — and former AMP bank CEO Sally Bruce.
“The concern of our team is that there will be a financial restructure of Virgin done quickly that will disenfranchise creditors who have seen value destroyed. You could end up with a very valuable business that somebody hasn’t had to pay for,’’ said Spiique co-founder David Hewish, noting ACAP had already held discussions with Virgin creditors.
Under its recapitalision plan for the airline, Virgin’s unsecured creditors would be given the option to convert all or a portion of their debt into equity; roll over their debt on a “standstill basis” or elect to receive a cash payment. New senior notes would be issued together with a potential equity component to investors underwriting the note offering.
“We certainly believe there is room to develop a plan B solution for Virgin. Fixing the business is the missing element in the current process,” Mr Hewish said. “The current tight timeline doesn’t give the business a chance to work with the stakeholders and come up with a plan.”
By ROBYN IRONSIDE12:00AM MAY 22, 2020
Virgin Australia CEO Paul Scurrah has told prospective buyers of the carrier the best way forward is to rebuild the business as a domestic airline with a strong frequent-flyer program.
The 20-year-old airline went into voluntary administration on April 20 with debts of $6.8bn, sparking a flood of interest from prospective buyers.
Four bidders were short-listed on Monday including Bain, BGH Capital, Indigo Partners and Cyrus Capital.
In a series of three-hour presentations to two of the bidders on Thursday, with two to follow on Friday, Mr Scurrah outlined how the airline could prosper by ditching its hodgepodge fleet of aircraft for a line-up of Boeing 737s. The domestic network could be rebuilt from scratch focusing on high-demand, lucrative routes, while international services and low-cost carrier Tigerair would be “optional extras”.
Costly contracts with Wi-Fi providers and caterers would be up for negotiation, presenting opportunities for significant savings.
As Mr Scurrah outlined the possibilities for Virgin 2, administrator Deloitte hosted the first committee-of-inspection meeting with 35 creditor representatives including unions, airports, banks, bondholders and suppliers. They were told of the increasing urgency for further funding to keep Virgin Australia flying. With government subsidies for flights due to come to an end on June 11, administrators revealed they were exploring various avenues for financial assistance including state governments and commercial lenders.
Although an existing $100m in cash was expected to see the airline through till the end of July, concern centred on Virgin Australia’s ability to ramp up to keep pace with rival Qantas. The meeting heard administrators were eyeing up to $238m in restricted cash, tied up against hedging and in merchant and credit card facilities.
Failing that, Deloitte also suggested to the committee one of the final two bidders could enter into some funding arrangement before settlement — precisely the scenario that scared off Brookfield.
It also emerged on Thursday that a group of restructuring experts calling itself Australia Connected Aviation Partners approached Virgin Australia’s administrator last week with a plan they believed best protected the interests of creditors in the administration process.
ACAP is being bankrolled by American entrepreneur Augie Fabela, the co-founder of the New York Stock Exchange-listed VEON, the seventh largest mobile phone operator in the world boasting $US22bn ($33.5bn) in revenues. Mr Fabela was also the chairman of the Koenigsegg Group, which acquired Swedish vehicle maker Saab more than a decade ago from General Motors.
In the ACAP team are three former EY partners who have started their own turnaround services business known as Spiique, which last year worked with *Deloitte’s Vaughan Strawbridge on the rescue of Axsesstoday, a publicly listed SME lender that went into voluntary administration.
Also in ACAP’s ranks is Dermot Mannion — former CEO at Aer Lingus and deputy chairman of Royal Brunei Airlines — and former AMP bank CEO Sally Bruce.
“The concern of our team is that there will be a financial restructure of Virgin done quickly that will disenfranchise creditors who have seen value destroyed. You could end up with a very valuable business that somebody hasn’t had to pay for,’’ said Spiique co-founder David Hewish, noting ACAP had already held discussions with Virgin creditors.
Under its recapitalision plan for the airline, Virgin’s unsecured creditors would be given the option to convert all or a portion of their debt into equity; roll over their debt on a “standstill basis” or elect to receive a cash payment. New senior notes would be issued together with a potential equity component to investors underwriting the note offering.
“We certainly believe there is room to develop a plan B solution for Virgin. Fixing the business is the missing element in the current process,” Mr Hewish said. “The current tight timeline doesn’t give the business a chance to work with the stakeholders and come up with a plan.”
Separately, the emergence of Australia Connected Aviation Partners can't be good for Deloitte's hit-and-run sale process. If ACAP can get the bondholders on board Deloitte could very easily be well and truly out of cash before a sale can be finalised.
Last edited by MickG0105; 22nd May 2020 at 07:10. Reason: Formatting
