20 buyers now circling Virgin Australia
Evertonian
Well, considering they only got those slots from BA, who have essentially just taken them back, I'm not sure that's a positive.
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Both Cyrus and Bain are edging towards their modus operandi. They have no intention of risking much of their own capital, but play the ringmaster of a three ring circus.
Last week they made it clear that without government/taxpayer money and guarantees then it will struggle to get off the ground.
This week it introduces the possibility of other investors, notably other airlines that may strategically benefit from an Australian domestic airline as well as current bond holders receiving a share of the airline rather than cents in the dollar on their investment.
The third ring of the circus is a buy in from
the employees. This typically involves two components. Firstly employees receive a share of the company in exchange for accrued benefits. Secondly employees take a “temporary” reduction in remuneration until the company becomes profitable.
Venture Capitalists don’t risk their own capital. They are the masters of bringing interested parties together who see personal advantage in an otherwise risky investment.
Last week they made it clear that without government/taxpayer money and guarantees then it will struggle to get off the ground.
This week it introduces the possibility of other investors, notably other airlines that may strategically benefit from an Australian domestic airline as well as current bond holders receiving a share of the airline rather than cents in the dollar on their investment.
The third ring of the circus is a buy in from
the employees. This typically involves two components. Firstly employees receive a share of the company in exchange for accrued benefits. Secondly employees take a “temporary” reduction in remuneration until the company becomes profitable.
Venture Capitalists don’t risk their own capital. They are the masters of bringing interested parties together who see personal advantage in an otherwise risky investment.
Last edited by Progress Wanchai; 15th Jun 2020 at 07:21.
Virgin America was sold as an operating airline and Alaska paid a big chunk of money for it. Virgin Australia is foundering in receivership. Please don't come here and say Virgin America was a failure and Virgin Oz isn't.
You will have to explain the BA giving Flybe slots. I have never heard of this considering they owned all the slots as far as I know.
You will have to explain the BA giving Flybe slots. I have never heard of this considering they owned all the slots as far as I know.
That approach would have caused a few issues for VARA, they've been flying their leased A320s pretty much daily since the business went into administration. For example, VNF, leased from Pembroke, has made nearly 130 flights since VA went into VA.
And no, I don't understand how they are managing to do that but Standard Chartered Bank (Singapore), acting for Pembroke, did kick up a stink about it early on the VA process.
And no, I don't understand how they are managing to do that but Standard Chartered Bank (Singapore), acting for Pembroke, did kick up a stink about it early on the VA process.
Evertonian
I did a search for "Who got the Flybe slots at LHR". Easy enough to find. Explained how the EU got involved I think & BA had to hand them over.
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ex the AFR: Virgin bondholders swell in number......
It would 'seem' to have now arrived at the 'Lawyers, Guns and Money (???)' vector of the Gig.................
Referenced/Article link here: https://www.afr.com/companies/transp...0200615-p552mi
Extract here:
Rgds all
S28- BE
Referenced/Article link here: https://www.afr.com/companies/transp...0200615-p552mi
Extract here:
Virgin bondholders swell in number
Virgin bondholders swell in number
Lucas Baird ReporterJun 15, 2020 – 5.49pm
A group of Virgin Australia's unsecured bond and note holders, owed about $2 billion collectively by the distressed airline, has swelled to nearly 6000 member in recent weeks making it one of the largest creditor factions by size and value. The Faraday-advised bondholders have also gained access to the company's data room.
The group, which is receiving advice from law firms Faraday and Corrs Chambers Westgarth, is the second significant kingmaker to emerge in Virgin's whirlwind sale behind its 9000 union-represented staff.
Workers are owed nearly $450 million in entitlements and have received particular attention from the two remaining bidders in the race – Bain Capital and Cyrus Capital Partners – which will need the numerical support to get any deal over the line at the second creditors' meeting in mid-August.
Final, binding offers for the airline, which tipped into administration under a nearly $7 billion debt pile at the height of the COVID-19 pandemic in late April, are due on June 22.
But the successful party will also need most of Virgin's debt behind it to win the sale. In the case of a deadlock, the airline's administrators from Deloitte will get the casting vote that will decide the ultimate fate of the company.
Still, if a deal is approved that sees little of the bondholders' claims repaid, this would likely result in a court challenge, said University of Sydney Law School professor Jason Harris."Given how much money is involved, it also makes it more likely that there will be a challenge. If there is a deed of company arrangement approved that would see bondholders paid virtually nothing, it could be challenged," Professor Harris said.
The Faraday-advised bondholders have gained access to the company's data room, raising the possibility of a counter-proposal out of the group or even an agreement to provide interim funding to the airline to ensure bondholders receive something back for their unsecured investments.
The dramatic increase in the number of bondholders comes after Cyrus spent the weekend spruiking its vision for a relaunched mid-market Virgin without its budget subsidiary Tigerair.
Jonathan Peachey, an adviser to the Wall Street hedge fund, said the airline group had become too complicated and, under Cyrus' ownership, would focus more heavily on network and fleet configuration.
Mr Peachey, who was chief executive of Virgin Group in North America between 2008 and 2013, denied this would return Virgin Australia to its low-cost Virgin Blue origins.Still, he wants to reinject the "challenger DNA" that drove its creation.
The pitch is very similar to what Bain Capital has in mind for Virgin, with the private equity firm's local managing director, Mike Murphy, previously claiming he wants to "bring back the best parts of the Virgin Blue culture".
Bain has so far failed to commit to retaining a competitive presence in the high-end market but has signalled a sharper focus on domestic flying than international operations.
Both Bain and Cyrus are likely to relaunch the airline with about 40 Boeing 737 planes in the air, with scope to expand closer to 70 as travel demand returns to some normality after the pandemic.
They are also bullish about their ability to launch a bid by the deadline without further government support, after Deloitte partner and lead administrator Vaughan Strawbridge last week wrote to Prime Minister Scott Morrison requesting clarity on the issue of financial assistance.
Mr Strawbridge said that without certainty around the future of the JobKeeper wage subsidy and the regulation of the competitive environment, Bain and Cyrus may not be able to launch a bid.
But Mr Peachey said Cyrus had the resources to make the bid in any case, but was supportive of the administrator's actions, and Bain has pointed to previous statements where it claims to have the "strongest capital base out of any of the bidders".
Jetstar Pacific will get a new name – Pacific Airlines – subject to regulatory and government approvals, and change its booking system to one consistent with Vietnam Airlines.
"We’ve been in discussions with Vietnam Airlines for some time about the challenges facing Jetstar Pacific, which have obviously intensified through the COVID crisis," Jetstar chief executive Gareth Evans said.
"Subject to the necessary approvals, our intention is to cease being a shareholder in the coming months so we can focus on our other airlines, and the changes to the brand in Vietnam announced today are part of that."
Lucas Baird is a journalist based in The Australian Financial Review's Sydney office. Connect with Lucas on Twitter. Email Lucas at [email protected]
A group of Virgin Australia's unsecured bond and note holders, owed about $2 billion collectively by the distressed airline, has swelled to nearly 6000 member in recent weeks making it one of the largest creditor factions by size and value. The Faraday-advised bondholders have also gained access to the company's data room.
The group, which is receiving advice from law firms Faraday and Corrs Chambers Westgarth, is the second significant kingmaker to emerge in Virgin's whirlwind sale behind its 9000 union-represented staff.
Workers are owed nearly $450 million in entitlements and have received particular attention from the two remaining bidders in the race – Bain Capital and Cyrus Capital Partners – which will need the numerical support to get any deal over the line at the second creditors' meeting in mid-August.
Final, binding offers for the airline, which tipped into administration under a nearly $7 billion debt pile at the height of the COVID-19 pandemic in late April, are due on June 22.
But the successful party will also need most of Virgin's debt behind it to win the sale. In the case of a deadlock, the airline's administrators from Deloitte will get the casting vote that will decide the ultimate fate of the company.
Still, if a deal is approved that sees little of the bondholders' claims repaid, this would likely result in a court challenge, said University of Sydney Law School professor Jason Harris."Given how much money is involved, it also makes it more likely that there will be a challenge. If there is a deed of company arrangement approved that would see bondholders paid virtually nothing, it could be challenged," Professor Harris said.
The Faraday-advised bondholders have gained access to the company's data room, raising the possibility of a counter-proposal out of the group or even an agreement to provide interim funding to the airline to ensure bondholders receive something back for their unsecured investments.
The dramatic increase in the number of bondholders comes after Cyrus spent the weekend spruiking its vision for a relaunched mid-market Virgin without its budget subsidiary Tigerair.
Jonathan Peachey, an adviser to the Wall Street hedge fund, said the airline group had become too complicated and, under Cyrus' ownership, would focus more heavily on network and fleet configuration.
Mr Peachey, who was chief executive of Virgin Group in North America between 2008 and 2013, denied this would return Virgin Australia to its low-cost Virgin Blue origins.Still, he wants to reinject the "challenger DNA" that drove its creation.
The pitch is very similar to what Bain Capital has in mind for Virgin, with the private equity firm's local managing director, Mike Murphy, previously claiming he wants to "bring back the best parts of the Virgin Blue culture".
Bain has so far failed to commit to retaining a competitive presence in the high-end market but has signalled a sharper focus on domestic flying than international operations.
Both Bain and Cyrus are likely to relaunch the airline with about 40 Boeing 737 planes in the air, with scope to expand closer to 70 as travel demand returns to some normality after the pandemic.
They are also bullish about their ability to launch a bid by the deadline without further government support, after Deloitte partner and lead administrator Vaughan Strawbridge last week wrote to Prime Minister Scott Morrison requesting clarity on the issue of financial assistance.
Mr Strawbridge said that without certainty around the future of the JobKeeper wage subsidy and the regulation of the competitive environment, Bain and Cyrus may not be able to launch a bid.
But Mr Peachey said Cyrus had the resources to make the bid in any case, but was supportive of the administrator's actions, and Bain has pointed to previous statements where it claims to have the "strongest capital base out of any of the bidders".
Qantas takes next step in offloading Jetstar Pacific
Meanwhile, Jetstar Pacific owners Qantas and majority shareholder Vietnam Airlines have agreed to make drastic changes to the airline as the Australian carrier seeks to exit its stake.Jetstar Pacific will get a new name – Pacific Airlines – subject to regulatory and government approvals, and change its booking system to one consistent with Vietnam Airlines.
"We’ve been in discussions with Vietnam Airlines for some time about the challenges facing Jetstar Pacific, which have obviously intensified through the COVID crisis," Jetstar chief executive Gareth Evans said.
"Subject to the necessary approvals, our intention is to cease being a shareholder in the coming months so we can focus on our other airlines, and the changes to the brand in Vietnam announced today are part of that."
Lucas Baird is a journalist based in The Australian Financial Review's Sydney office. Connect with Lucas on Twitter. Email Lucas at [email protected]
S28- BE
Last edited by Section28- BE; 16th Jun 2020 at 00:27.
The unions hold the whip hand. The employees are the only grouping who can block a DOCA as they are more than half the creditors by number.
That is almost certainly the reason that both Cyrus and Bain have been talking up Captain Schettino and the bridge crew (Scurrah and the current management team); that's the management group that the unions prefer to deal with. Scurrah is seen as union friendly from his days at Queensland Rail and DP World and by virtue of his long standing ties to Queensland Labor.
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It may be true that the employees are the only stand alone group that can block a DOCA. That’s immediate liquidation. So it’s a pointless consideration. Why would they?
Sadly the same group with a debt of 450 Million do not have stand alone power to ensure a successful DOCA.
Many possible scenarios and all very speculative but by way of example, all it would take to send Virgin into liquidation is ~ 35% of the secured creditors debt along with the 6000 bond holders 2 Billion debt blocking any DOCA by value alone.
Anything is possible. Let’s hope for the best.
Sadly the same group with a debt of 450 Million do not have stand alone power to ensure a successful DOCA.
Many possible scenarios and all very speculative but by way of example, all it would take to send Virgin into liquidation is ~ 35% of the secured creditors debt along with the 6000 bond holders 2 Billion debt blocking any DOCA by value alone.
Anything is possible. Let’s hope for the best.
We're already seeing the ALAEA and the FAAA lining up for Cyrus so how this thing is going to play out is anyone's guess.
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Ministers fume over Virgin salvage plans
EXCLUSIVE
SIMON BENSON GEOFF CHAMBERSSenior Morrison government ministers are privately furious with administrators trying to salvage Virgin Australia, amid claims the process has been botched and concerns that regional routes and jobs could be slashed by the two US hedge funds vying for the airline.
The Australian understands the government is concerned that there is no guarantee Virgin Australia might not fall over again within six months.
The only serious Australian bidder, which had promised to guarantee regional services through a reduced cost base, has been knocked out.
Sources close to the process claim New York-based bidder Cyrus Capital and Bain Capital, based in Boston, have not been engaged on plans for worker concessions and entitlements, regional services or competitive advantage.
A senior government source said just as the government refused to bail out Virgin Australia before it fell into administration in April, there would be no commonwealth money to help the airline if it went out of business because the wrong bidder was selected.
Another government source said a commitment to guaranteeing regional services could end up being a condition of approval of sale under the Foreign Investment Review Board.
Bain Capital, the fund started by US Republic senator and former presidential candidate Mitt Romney, and “minnow” fund Cyrus, linked to Richard Branson, are expected to lodge their final bids on Monday.
A government minister said there was “deep frustration” about the process undertaken by Virgin Australia administrator Deloitte. There is also concern about a new ownership structure being put in place before state borders reopen and JobKeeper payments wind up in September.
Senior government sources said Virgin’s administrators had miscalculated by leaving two US hedge funds in the race and excluding BGH Capital and Australian Super, which were proposing to inject $800m-$900m of working capital into the airline.
The government decided not to proceed with a rescue package after The Australian revealed in April that Virgin Australia had requested financial support from the commonwealth in the order of $1.4bn. Other Western nations provided bailouts to major airlines, including US giant Delta and Singapore Airlines, which received $9bn in support.
Despite promises from bidders that there would be no mass job cuts, the Virgin 2.0 plans are expected to streamline the lossmaking airline, potentially affecting 10,000 employees and 6000 contractors, many of whom have fallen on to JobKeeper payments, which end on September 27.
Regional government MPs have raised concerns about the potential for a new Virgin Australia owner to revert to a Virgin Blue capital-city model. A previous regional airline investment by Cyrus in Britain ended with the company in administration.
North Queensland Nationals senator Matt Canavan raised concerns at an expenditure review committee of cabinet meeting earlier this year about losing control of the process.
“I remain concerned that the Virgin 2.0 that comes out of this may not serve regional Australia,” Senator Canavan said. “That means it’s important we as the government look to support airline services in regional Australia after this sale process. There’s a variety of ways we could do that
— including considering options of supporting a new Virgin in some way, shape or form. Another is establishing a more dedicated regulatory structure, which supports competition.”
Deputy Prime Minister Michael McCormack, who holds the transport and infrastructure portfolios, said the government’s preference had “always been and continues to be a market-led solution for Virgin”. “We remain confident this solution will see Virgin Australia emerge in the best position possible post-pandemic and we continue to work constructively with the administrator and interested parties to understand their progress.”
The Nationals leader, who has announced more than $1.3bn in COVID-19 aviation support measures, said the government continued to support regional aviation networks with up to 164 weekly services on 74 routes, accessing more than 100 regional and remote communities.
Ahead of the looming deadline for binding offers, Cyrus bid proponents, backed by the Flight Attendants Association of Australia and Australian Licensed Aircraft Engineers Association, pledged to retain Virgin Australia chief Paul Scurrah and senior management.
Deloitte declined to comment.
You have never seen pure evil until you have seen Venture Capitalists at work. I would care not what assurances are in the DOCA. What will be important is what is left OUT of the DOCA. Regional services, employment guarantees, it won’t matter. The Government is correct to be skeptical.
My lawyers used the analogy of a marriage; you start at the “flowers and chocolates” stage and in at the “divorce court”. You guys are still focussed on the “flowers and chocolates “ end. There will be smiles and champagne shortly. However the VCs are already focussed on the divorce court exit strategy which is kept from you and which neither you nor the general public nor the government are unlikely to enjoy.
You have never had that sinking feeling until you get the VC letter on day 2 with the opening sentence: “Terms in this letter have the same meaning as in the deed of company arrangement”. Under the terms of DOCA, You are required to do ........... and advise the undersigned when it is completed......”. What are then listed are a series of unpalatable actions or prohibitions followed by a legal threat.
‘’If I was you I would hope for the best but actively look for another job and/or a second career.
My lawyers used the analogy of a marriage; you start at the “flowers and chocolates” stage and in at the “divorce court”. You guys are still focussed on the “flowers and chocolates “ end. There will be smiles and champagne shortly. However the VCs are already focussed on the divorce court exit strategy which is kept from you and which neither you nor the general public nor the government are unlikely to enjoy.
You have never had that sinking feeling until you get the VC letter on day 2 with the opening sentence: “Terms in this letter have the same meaning as in the deed of company arrangement”. Under the terms of DOCA, You are required to do ........... and advise the undersigned when it is completed......”. What are then listed are a series of unpalatable actions or prohibitions followed by a legal threat.
‘’If I was you I would hope for the best but actively look for another job and/or a second career.