20 buyers now circling Virgin Australia
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Virgin bondholders ‘can’t beat Bain’
Virgin Australia’s sale to Bain Capital is unable to be undone by bondholders, court told.
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Don’t think he’s spoken has he, that quote was from the Deloitte lawyer. Seems like it’s been adjourned.
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ex the Fed Court: hearing listed at 11.15am , ref: "Sale and Implementation Deed"....
Looks like today's hearing has given (some???) access to the Sale Agreement, to the Bondholders Legal Representatives.....
Extract:
Link to the complete Order here: https://www.fedcourt.gov.au/__data/a...-142427250.pdf
As you both say, time will reveal....
rgds
S28- BE
Extract:
..... in the form provided to the legal representatives of Broad Peak Investment Advisers Pte Ltd and Tor Investment Management (Hong Kong) Ltd on 17 August 2020
As you both say, time will reveal....
rgds
S28- BE
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https://www.smh.com.au/business/comp...17-p55mj1.html
According to this article Justice Middleton has thrown out the application of the bond holders, though the bond holders will pursue further legal action.
Sept 4 can't come quick enough. Call it a tug of war that Bain needs that extra inch to win.
According to this article Justice Middleton has thrown out the application of the bond holders, though the bond holders will pursue further legal action.
Sept 4 can't come quick enough. Call it a tug of war that Bain needs that extra inch to win.
Last edited by Turnleft080; 17th Aug 2020 at 10:03.
Mick, you raise a good point, I should have said independent aviation forensic accounting capability. I also suggest that it may be that Virgin doesn’t have much capability considering they went under but it may not be the accountants fault.
‘’The Virgin team will be producing the results based on the assumptions they have been given. We don’t know what they are.
The technical accounting side:
- how do you value an AOC?
- The fitout of a leased terminal?
- A refurbished set of turbine blades?
- An integrated drive generator - a rotable.?
-GSE including the workstands?
I know there are standards but I’m not sure there are many people who can apply them to airlines.
The winner in this contest knows the true vale which I contend is likely to be much more than Bains offer.
......Yes I know, the value of a thing is what it will.....
‘’The Virgin team will be producing the results based on the assumptions they have been given. We don’t know what they are.
The technical accounting side:
- how do you value an AOC?
- The fitout of a leased terminal?
- A refurbished set of turbine blades?
- An integrated drive generator - a rotable.?
-GSE including the workstands?
I know there are standards but I’m not sure there are many people who can apply them to airlines.
The winner in this contest knows the true vale which I contend is likely to be much more than Bains offer.
......Yes I know, the value of a thing is what it will.....
The depreciated value of the cost of establishing it plus the annual cost of maintaining it. Or its replacement cost. Dealer's choice.
The depreciated capitalised value of the fitout.
In accordance with your Asset Spares Valuation policy, typically Current hours x [(New Replacement Cost less Scrap Value)/Life Hours] for an individual item or the aggregated annual average for the entire stock holding.
Again, in accordance with your Asset Spares Valuation policy, calculated along the lines for the refurbished blades except that hours might be swapped out for the number of refurbishments between new and scrapped if that was a more realistic measure.
The depreciated capitalised value.
That is all bread-and-butter stuff for a maintenance asset accountant. Hell, they manage this sort of stuff on oil rigs and at mines sites out the back of beyond, its application at an airline is not that difficult. These days the asset values are tracked and calculated by the maintenance inventory management system.
The asset valuations - book values - are frankly only meaningful if you're looking at winding a business up. Otherwise it's interesting but somewhat academic because for a going concern the determinant of the business's aggregate value is what it can make for you. And that is generally reflected in the business's market cap. That is one of the reasons that prior to the coronavirus crisis Virgin had a book value that was underwater but a market cap of $725-odd million.
But at the end of the day, as I drummed into anyone who'd listen, the market is the final arbiter of value. What's something worth? Only what someone else is willing to pay for it.
The depreciated capitalised value of the fitout.
In accordance with your Asset Spares Valuation policy, typically Current hours x [(New Replacement Cost less Scrap Value)/Life Hours] for an individual item or the aggregated annual average for the entire stock holding.
Again, in accordance with your Asset Spares Valuation policy, calculated along the lines for the refurbished blades except that hours might be swapped out for the number of refurbishments between new and scrapped if that was a more realistic measure.
The depreciated capitalised value.
But at the end of the day, as I drummed into anyone who'd listen, the market is the final arbiter of value. What's something worth? Only what someone else is willing to pay for it.
Last edited by MickG0105; 17th Aug 2020 at 12:01. Reason: Typo
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ex the SMH: Virgin's rebel bondholders suffer major setback.........
Link: https://www.smh.com.au/business/comp...17-p55mj1.html
Extract (Bolding):
rgds
S28- BE
Extract (Bolding):
Virgin's rebel bondholders suffer major setback
Virgin's rebel bondholders suffer major setback
By Sarah Danckert August 17, 2020 — 6.00pm
Administrators to bankrupt airline Virgin plan to barrel ahead with a sale of the carrier to Bain Capital after a court threw out a request by bondholders for their alternative proposal to be put to creditors at an upcoming meeting.
The Federal Court stopped short of blocking any alternative proposal being circulated to creditors ahead of the meeting in September but threw out the specific request by bondholders to force Virgin's administrators from Deloitte to hold a vote on the two separate proposals.
Justice John Middleton threw out the application from hedge funds Broad Peak Investment and Tor Investments to have an independent party, known as a facilitator, to oversee the meeting.
The bondholders had also asked the court to order Deloitte to put a formal resolution to the meeting for creditors to consider its rescue proposal, known as a deed of company arrangement (DOCA).
But the fight might not be over yet with lawyers for the bondholders flagging during Monday's court hearing that they will pursue further legal action to push ahead with their proposal.
Bondholders took this step after Deloitte revealed it was planning to only present Bain's DOCA to creditors and then to ask creditors to vote to approve or knock back that offer. Under Bain's DOCA, bondholders are expected to only get 10 cents in the dollar.
But Justice Middleton threw out these requests in a blow for the bondholders, owed $2 billion in total, and were supported in their court bid (albeit through separate lawyers) by a range of Australian investment houses holding notes, including Escala Partners, Crestone Capital, Morgans, Alexander Funds and Yarra Funds Management.
Justice Middleton rejected the push by Broad Peak and Tor after hearing from the lawyer for Deloitte that under the specific sale agreement between Deloitte and Bain any vote by creditors against the Bain proposal would automatically mean the meeting adjourned, and that adjournment would trigger a clause to force the sale to Bain.
"We agree that an alternative DOCA can be put [to creditors ahead of the meeting]. It need not be recommended or endorsed by administrators and will not be," counsel of Deloitte, Ruth Higgins, SC, said.
"What our concern is that the alternative DOCA cannot succeed because the assets have been sold," Dr Higgins said.
"It is that circumstance that creates the futility and the difficulty of purporting to present it to creditors."
Justice Middleton reserved his reasons for dismissing Broad Peak and Tor's application until a later date. Bondholders were contacted for comment.
Bain has welcomed the decision by Justice Middleton.
"Bain Capital’s key focus is getting through administration to ensure Virgin Australia fights another day and has the chance to rebuild."
In a separate legal matter before the Federal Court on Monday, Virgin's administrators from Deloitte lost their bid to restrict the rights of leaseholders, represented through Wells Fargo, who have loaned the collapsed airline four jet engines.
Deloitte indicated to the court that it would appeal Justice Middleton's decision in terms of the leaseholders.
Administrators to bankrupt airline Virgin plan to barrel ahead with a sale of the carrier to Bain Capital after a court threw out a request by bondholders for their alternative proposal to be put to creditors at an upcoming meeting.
The Federal Court stopped short of blocking any alternative proposal being circulated to creditors ahead of the meeting in September but threw out the specific request by bondholders to force Virgin's administrators from Deloitte to hold a vote on the two separate proposals.
Justice John Middleton threw out the application from hedge funds Broad Peak Investment and Tor Investments to have an independent party, known as a facilitator, to oversee the meeting.
The bondholders had also asked the court to order Deloitte to put a formal resolution to the meeting for creditors to consider its rescue proposal, known as a deed of company arrangement (DOCA).
But the fight might not be over yet with lawyers for the bondholders flagging during Monday's court hearing that they will pursue further legal action to push ahead with their proposal.
Bondholders took this step after Deloitte revealed it was planning to only present Bain's DOCA to creditors and then to ask creditors to vote to approve or knock back that offer. Under Bain's DOCA, bondholders are expected to only get 10 cents in the dollar.
But Justice Middleton threw out these requests in a blow for the bondholders, owed $2 billion in total, and were supported in their court bid (albeit through separate lawyers) by a range of Australian investment houses holding notes, including Escala Partners, Crestone Capital, Morgans, Alexander Funds and Yarra Funds Management.
Justice Middleton rejected the push by Broad Peak and Tor after hearing from the lawyer for Deloitte that under the specific sale agreement between Deloitte and Bain any vote by creditors against the Bain proposal would automatically mean the meeting adjourned, and that adjournment would trigger a clause to force the sale to Bain.
"We agree that an alternative DOCA can be put [to creditors ahead of the meeting]. It need not be recommended or endorsed by administrators and will not be," counsel of Deloitte, Ruth Higgins, SC, said.
"What our concern is that the alternative DOCA cannot succeed because the assets have been sold," Dr Higgins said.
"It is that circumstance that creates the futility and the difficulty of purporting to present it to creditors."
Justice Middleton reserved his reasons for dismissing Broad Peak and Tor's application until a later date. Bondholders were contacted for comment.
Bain has welcomed the decision by Justice Middleton.
"Bain Capital’s key focus is getting through administration to ensure Virgin Australia fights another day and has the chance to rebuild."
In a separate legal matter before the Federal Court on Monday, Virgin's administrators from Deloitte lost their bid to restrict the rights of leaseholders, represented through Wells Fargo, who have loaned the collapsed airline four jet engines.
Deloitte indicated to the court that it would appeal Justice Middleton's decision in terms of the leaseholders.
S28- BE
Last edited by Section28- BE; 17th Aug 2020 at 22:13. Reason: Bolding.....
Mick, thank you for your reply. Yes, “depreciated book value”will be used. That is the greatest gift to Bain. The airline should be valued as a going concern, but it won’t be. That is why I mentioned the Ansett DC9s. They were sold by Peter and Rupert at something close to depreciated value. The reality was that they were still perfectly good serviceable aircraft and the new owners made $$$. I could go on but I risk defamation.
‘’Australian tax law allowed us to gold plate our aircraft by treating ADs and SBs as expense items, not capital expenditures (again lack of technical accounting skills in the auditors and ATO). The result was that these old aircraft were virtually as new as far as technical specs were concerned. They were worth a lot second hand.
Same with rotables - they are like grandfathers axe.
‘’Book value will be used. Replacement cost is more appropriate.
‘’Australian tax law allowed us to gold plate our aircraft by treating ADs and SBs as expense items, not capital expenditures (again lack of technical accounting skills in the auditors and ATO). The result was that these old aircraft were virtually as new as far as technical specs were concerned. They were worth a lot second hand.
Same with rotables - they are like grandfathers axe.
‘’Book value will be used. Replacement cost is more appropriate.
Mick, thank you for your reply. Yes, “depreciated book value”will be used. That is the greatest gift to Bain. The airline should be valued as a going concern, but it won’t be. That is why I mentioned the Ansett DC9s. They were sold by Peter and Rupert at something close to depreciated value. The reality was that they were still perfectly good serviceable aircraft and the new owners made $$$. I could go on but I risk defamation.
‘’Australian tax law allowed us to gold plate our aircraft by treating ADs and SBs as expense items, not capital expenditures (again lack of technical accounting skills in the auditors and ATO). The result was that these old aircraft were virtually as new as far as technical specs were concerned. They were worth a lot second hand.
Same with rotables - they are like grandfathers axe.
‘’Book value will be used. Replacement cost is more appropriate.
‘’Australian tax law allowed us to gold plate our aircraft by treating ADs and SBs as expense items, not capital expenditures (again lack of technical accounting skills in the auditors and ATO). The result was that these old aircraft were virtually as new as far as technical specs were concerned. They were worth a lot second hand.
Same with rotables - they are like grandfathers axe.
‘’Book value will be used. Replacement cost is more appropriate.
But at the end of the day, it's all largely academic. What your car is worth when you go to sell it is not one cent more than what someone else is prepared to pay you for it. The market is the final arbiter of value.
Yes Mick, the trouble is that Deloittes won't accept a market bid from the bondholders and the market doesn't know what bain bid because its a secret..
Last edited by Sunfish; 18th Aug 2020 at 02:42.
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Hmmmm- given, the foregoing/above:
Ex the SMH 'reported' comments of 10 July, referenced toward- 'a' Middleton J:
Interesting/or NOT.... should, 'it' all 'be' Good- done 'em (and the 6k Mum & Dad's) with a knife..... at 'a' gun fight??????
And, so it maybe- 12,000 talk to..... X, about what/and how they trashed 2x $Bill...., they then talk to.....????
Good Marketing/Experience.... & Brand Recognition!!!!!
Let, 'us' see- and really All the Best
rgds all/& be Well
S28- BE
Ex the SMH 'reported' comments of 10 July, referenced toward- 'a' Middleton J:
"The administrators may have to make some rather hard decisions about how much they do disclose information for the purposes of the second creditors' meeting. If they take a particular approach the second creditors' meeting may become litigious," Justice Middleton said.
And, so it maybe- 12,000 talk to..... X, about what/and how they trashed 2x $Bill...., they then talk to.....????
Good Marketing/Experience.... & Brand Recognition!!!!!
Let, 'us' see- and really All the Best
rgds all/& be Well
S28- BE
Last edited by Section28- BE; 18th Aug 2020 at 10:46. Reason: Manners,,,,
Muh Feelz is that something interesting is being tried... Blackout and section28 are on to it. The Bain deal was like a flashy glittering fishing lure.......and Deloittes, like a big flathead, grabbed it.......without noticing the barbs.
BTW, ‘pre completion restructure” sounds like Deloittes gets covered in the blood and gore of retrenchment and restructure - with the Commonwealth picking up shortfalls in entitlements, before handing the gutted carcass to Bain.
BTW, ‘pre completion restructure” sounds like Deloittes gets covered in the blood and gore of retrenchment and restructure - with the Commonwealth picking up shortfalls in entitlements, before handing the gutted carcass to Bain.
https://www.fedcourt.gov.au/__data/a...t-17082020.pdf
5 MR JACKMAN: Your Honour, can I address the sale and implementation deed which you’ve been provided with.
HIS HONOUR: Yes.
20 MR JACKMAN: And we maintain our submission that any sale of assets is conditional upon the Bain DOCA being rejected by creditors, that there won’t be an asset sale unless and until the Bain DOCA is rejected, and having seen the agreement we also submit that there is no binding contract of the sale of assets at this stage.
25 MR JACKMAN: Now, the provisions that I want to draw your Honour’s attention to, first in the sale and implementation deed, if your Honour goes to page 12.
HIS HONOUR: Yes.
30 MR JACKMAN: On page 12 it has a definition for “target signing date”.
HIS HONOUR: Yes.
MR JACKMAN: And I ask your Honour to note the number of business days referred to there, which of course is one day short of the adjourned meeting.
HIS HONOUR: Yes.
MR JACKMAN: And there won’t be a signed agreement until then. Then your Honour was taken to clause 3.3, there’s some words that I should emphasise in the first line of 3.3, namely “subject to clause 3.4(a)”, and 3.4(a) does deal with the purchaser’s DOCA being approved. It then talks, in 3.4(a)(i), of “the entry into the asset sale agreement”, that’s something that happened in the future, and if signed, and of course it won’t be for a couple of months yet, the asset sale agreement will terminate. In other words, going back to 3.3(a), those words “subject to clause 3.4(a)” indicate expressly that there is not going to be a sale of the asset if the purchaser’s DOCA was approved. Indeed, it would be absurd for there to be a sale of assets if the purchasers DOCA was approved because the shares are going to be transferred, as Dr Higgins said, under 444GA.
Now, then if one goes to clause 7.2, Dr Higgins referred your Honour to clause 7.2, 5 but what she didn’t emphasise is that this is no more than an agreement to agree.
Your Honour will see that in the first two lines of 7.2(a), and this is of absolutely fundamental importance. Because if one goes ahead to the draft asset sale agreement, at page 11, there’s an important condition precedent in clause 2.1, the clause doesn’t become binding on the parties and is of no force and effect unless and until the following condition has been satisfied or waived, and then you’ve got the pre-completion restructure, or the minimum business critical ..... And going back to 7.2(a), the pre-completion restructure at this point is simply an agreement to agree, it may or may not culminate in an agreement, but at this stage one just doesn’t know.
------------
35 what the contract provides for is for an adjournment for 45 days which, of course, is one day longer than the target signing date. And they don’t want a vote on other alternatives until then as your Honour can see. So we submit on the basis of that there is no binding contract for sale as yetbut to the extent that there might be any sale of the assets is entirely conditional on the Bain DOCA being rejected at the second creditors meeting and the creditors meeting being ..... So the argument that we began with today we maintain is correct having seen these extracts from the Bain contract.
45 HIS HONOUR: Yes. Thank you, Mr Jackman, on that.
5 MR JACKMAN: Your Honour, can I address the sale and implementation deed which you’ve been provided with.
HIS HONOUR: Yes.
20 MR JACKMAN: And we maintain our submission that any sale of assets is conditional upon the Bain DOCA being rejected by creditors, that there won’t be an asset sale unless and until the Bain DOCA is rejected, and having seen the agreement we also submit that there is no binding contract of the sale of assets at this stage.
25 MR JACKMAN: Now, the provisions that I want to draw your Honour’s attention to, first in the sale and implementation deed, if your Honour goes to page 12.
HIS HONOUR: Yes.
30 MR JACKMAN: On page 12 it has a definition for “target signing date”.
HIS HONOUR: Yes.
MR JACKMAN: And I ask your Honour to note the number of business days referred to there, which of course is one day short of the adjourned meeting.
HIS HONOUR: Yes.
MR JACKMAN: And there won’t be a signed agreement until then. Then your Honour was taken to clause 3.3, there’s some words that I should emphasise in the first line of 3.3, namely “subject to clause 3.4(a)”, and 3.4(a) does deal with the purchaser’s DOCA being approved. It then talks, in 3.4(a)(i), of “the entry into the asset sale agreement”, that’s something that happened in the future, and if signed, and of course it won’t be for a couple of months yet, the asset sale agreement will terminate. In other words, going back to 3.3(a), those words “subject to clause 3.4(a)” indicate expressly that there is not going to be a sale of the asset if the purchaser’s DOCA was approved. Indeed, it would be absurd for there to be a sale of assets if the purchasers DOCA was approved because the shares are going to be transferred, as Dr Higgins said, under 444GA.
Now, then if one goes to clause 7.2, Dr Higgins referred your Honour to clause 7.2, 5 but what she didn’t emphasise is that this is no more than an agreement to agree.
Your Honour will see that in the first two lines of 7.2(a), and this is of absolutely fundamental importance. Because if one goes ahead to the draft asset sale agreement, at page 11, there’s an important condition precedent in clause 2.1, the clause doesn’t become binding on the parties and is of no force and effect unless and until the following condition has been satisfied or waived, and then you’ve got the pre-completion restructure, or the minimum business critical ..... And going back to 7.2(a), the pre-completion restructure at this point is simply an agreement to agree, it may or may not culminate in an agreement, but at this stage one just doesn’t know.
------------
35 what the contract provides for is for an adjournment for 45 days which, of course, is one day longer than the target signing date. And they don’t want a vote on other alternatives until then as your Honour can see. So we submit on the basis of that there is no binding contract for sale as yetbut to the extent that there might be any sale of the assets is entirely conditional on the Bain DOCA being rejected at the second creditors meeting and the creditors meeting being ..... So the argument that we began with today we maintain is correct having seen these extracts from the Bain contract.
45 HIS HONOUR: Yes. Thank you, Mr Jackman, on that.
The seven pages (pp. 45-52) where Dr Higgins and Mr Peters for Deloitte and Bain respectively explain why the sale implementation deed and DOCA process represents a binding sale clearly won the day because Middleton J didn't even need to retire to consider arguments. He was sorting out who costs should be awarded against within a minute of Mr Jackman for Broad Peak and Tor finishing the argument you've outlined above.
If you were going to quote anything from the days proceedings in summary it might better have been:
THE COURT ORDERS THAT:
1. The Interlocutory Process filed 11 August 2020 (Interlocutory Process) by Broad Peak Investment Advisers Pte. Ltd (for and on behalf of Broad Peak Master Fund II Ltd and Broad Peak Asia Credit Opportunities Holdings Pte. Ltd) and Tor Investment Management (Hong Kong) Ltd (together, the Applicants) be dismissed.
2. The Applicants pay the Plaintiffs’ costs of the Interlocutory Process.
...
1. The Interlocutory Process filed 11 August 2020 (Interlocutory Process) by Broad Peak Investment Advisers Pte. Ltd (for and on behalf of Broad Peak Master Fund II Ltd and Broad Peak Asia Credit Opportunities Holdings Pte. Ltd) and Tor Investment Management (Hong Kong) Ltd (together, the Applicants) be dismissed.
2. The Applicants pay the Plaintiffs’ costs of the Interlocutory Process.
...
Did you miss the bit right at the end where Middleton J dismissed their application and awarded costs against them? That, by any normal accounting, is a loss.
The administrator will continue to run the process as they intended; the notice of meeting and report to creditors will be issued on the 25th, the second creditors' meeting will be held on the 4th, the Bain DOCA will be presented, it will likely be voted up by a majority by both value (secured creditors) and number (employees) and then it's done. All over, Red Rover.
The bond holders might want to take a shot at challenging the administrator's sales process but that won't reverse the sale.
The administrator will continue to run the process as they intended; the notice of meeting and report to creditors will be issued on the 25th, the second creditors' meeting will be held on the 4th, the Bain DOCA will be presented, it will likely be voted up by a majority by both value (secured creditors) and number (employees) and then it's done. All over, Red Rover.
The bond holders might want to take a shot at challenging the administrator's sales process but that won't reverse the sale.