Go Back  PPRuNe Forums > PPRuNe Worldwide > Australia, New Zealand & the Pacific
Reload this Page >

20 buyers now circling Virgin Australia

Australia, New Zealand & the Pacific Airline and RPT Rumours & News in Australia, enZed and the Pacific

20 buyers now circling Virgin Australia

Old 28th Aug 2020, 06:07
  #1041 (permalink)  
 
Join Date: Aug 2004
Location: moon
Posts: 0
The staff “lent” the cash that was provisioned to pay their FULL entitlements to the Virgin Administrators to keep the airline trading. If Virgin had then gone under. the staff would have received partial entitlements under the FEG Scheme.........and once the staff had woken up to what had been done, it would have been off to the Supreme Court to sue Deloitte.

It was jolly decent of you staff to keep the airline going so Bain could buy it.

No wonder Deloitte was adamant that Bain was to be the buyer. Deloitte stood to end up in deep crap if Virgin was liquidated AFTER they had spent the employee entitlement cash!

Full employee entitlements plus lsl and redundancy was estimated at 440 million. Virgin had 1.4 billion in cash and receivables at that point.

‘’But we told the Government and they let us do it! Deloitte said this was in the interest of the creditors, but not necessarily the employees if it had gone under.

Watch all the cash disappear when Bain takes over. It will all be replaced by debt. Anyone remember “Catch 22”? The scene where Yossarian goes to the medical kit for morphine to ease the wounded Snowden’s pain but there is nothing - Milo Minderbender had sold all the morphine and left an IOU in the kit.

Last edited by Sunfish; 28th Aug 2020 at 06:28.
Sunfish is offline  
Old 28th Aug 2020, 06:22
  #1042 (permalink)  
 
Join Date: Feb 2001
Posts: 229
Originally Posted by Sunfish View Post
The staff “lent” the cash that was provisioned to pay their FULL entitlements to the Virgin Administrators to keep the airline trading. If Virgin had then gone under. the staff would have received partial entitlements under the FEG Scheme.........and once the staff had woken up to what had been done, it would have been off to the Supreme Court to sue Deloitte.

It was jolly decent of you staff to keep the airline going so Bain could buy it.

No wonder Deloitte was adamant that Bain was to be the buyer. Deloitte stood to end up in deep crap if Virgin was liquidated AFTER they had spent the employee entitlement cash!

Full employee entitlements plus lsl and redundancy was estimated at 440 million. Virgin had 1.4 billion in cash and receivables at that point.

‘’But we told the Government and they let us do it

Apparently, it was 'in the best interest to creditors as a whole'. ??

The Federal Government was not forthcoming ??
Blackout is offline  
Old 28th Aug 2020, 06:28
  #1043 (permalink)  
 
Join Date: Aug 2018
Location: Somewhere
Posts: 134
I wonder how close they actually got to pulling the trigger on a windup?

Apparently, it was 'in the best interest to creditors as a whole'. ??
In that they would get something in a sale but zero in a bankruptcy
non_state_actor is offline  
Old 28th Aug 2020, 06:39
  #1044 (permalink)  
 
Join Date: Feb 2001
Posts: 229
Well the question is, who are the Creditors as a whole? Certainly not the Employees ! Circulating Assets?
Blackout is offline  
Old 28th Aug 2020, 08:02
  #1045 (permalink)  
 
Join Date: May 2016
Location: Sunshine Coast
Posts: 297
Originally Posted by Sunfish View Post
Full employee entitlements plus lsl and redundancy was estimated at 440 million. Virgin had 1.4 billion in cash and receivables at that point.
What 'point' are you talking about, Sunfish? At the point that the business entered voluntary administration Virgin had $541.4 million in cash and term deposit​​​​​​s but those funds were frozen by financiers. Deloitte had to borrow money to pay wages during the first two weeks of the administration.

If you want to point the finger at someone for blowing through the reserves you would hope marked the threshold for entering voluntary administration (namely, sufficient unrestricted cash to pay staff wages and entitlements), then take aim at management. They determined when the administrator would be called in.

It is now apparent that management was essentially flying blind when it came to the business's actual finances and financial performance. On the day that the administrator has determined the business probably slipped into insolvency, Virgin's CEO was telling the market that 'We are well positioned to weather this storm.' Clueless would be one way to describe that.

The administrator was placed in the invidious position of having to quickly make a determination whether to continue trading - which meant using whatever cash they could free up to continue running the business cognisant that doing so would mean less to nothing in the kitty for employee entitlements in the event of liquidation - or cease trading and liquidate the business then and there. The reason that Deloitte found themselves in that position was not of their making, it was because management had left it a month too late before biting the bullet and entering voluntary administration. And I seem to recall that belated decision being called 'courageous' by someone at the time.

Last edited by MickG0105; 28th Aug 2020 at 11:24. Reason: Added note re mgmt
MickG0105 is offline  
Old 28th Aug 2020, 08:51
  #1046 (permalink)  
34R
 
Join Date: Jul 2002
Location: Brisbane
Age: 49
Posts: 230
Originally Posted by Blackout View Post
I cant wait to see what the new EA will be with Bain, and how much a Redundancy package is worth working on a 20% 'flexible' roster.
I guess that will depend on how many of your colleagues the pilot body as a whole would like to keep on the books. One number will be inversely proportional to the other.
34R is offline  
Old 28th Aug 2020, 11:45
  #1047 (permalink)  
 
Join Date: Aug 2004
Location: moon
Posts: 0
Mick, what is your background? I’m not disagreeing with your posts. I understand the invidious position, etc. However once Bain understood what Deloitteses had done, well, they could screw them down to nothing because Deloitte made an irrevocable decision to sell the business as a going concern and Bain was the only buyer who I think could have covered Deloittes backside. I’m sure you are right about the cash position.

To put that another way, Deloitte made a breathtaking irrevocable decision once it decided to burn through the provisions for employee entitlements. I would have to ask, if the Directors were trading while insolvent if they did this? The answer would be yes. But when the Administrator does it? I would have thought the answer is also “yes”. However on a technicality, the Administrator gets away with something that would have seen the Directors perhaps jailed.

Deloitte seems to have made “one last throw of the dice” using money that should have been used to cover employee entitlements in a liquidation. You can argue that this was in the best interests of the creditors - probably. However was it in the best interest of the employees? If Bain didn’t buy, then no.

What Deloitte may have done is loosely the equivalent to the crooked bank manager who has stolen a million from his employer and lost it gambling. He steals another million, bets double or nothing, and wins. He puts the money back. Has a crime still been committed if he is discovered? Not that Deloitte is crooked of course.

However I am not a lawyer and I’m not alleging Deloitte did anything illegal.

Last edited by Sunfish; 28th Aug 2020 at 12:18.
Sunfish is offline  
Old 28th Aug 2020, 12:04
  #1048 (permalink)  
 
Join Date: Feb 2001
Posts: 229
If the company was Liquidated when legally, it probably should of been, the Employees would have received their entitlements.

Under Bain , you get 100% of your entitlements (only if it gets voted up), but you can (in all probability) minus 80% from that with the new diminished EA they will be so hot to push through.

So anyone made redundant after the new EA, has effectively been sold out.

Being made redundant or liquidation, (and Jobkeeper is keeping/forcing people from being made redundant), the question is, will FEG and your current EA entitlements be better off in the Liquidation scenario, or, would you be better off voting on this new DOCA with no FEG, and no guarantees for that matter, in the future of your employment?
Blackout is offline  
Old 28th Aug 2020, 13:18
  #1049 (permalink)  
 
Join Date: Sep 2005
Location: NT
Posts: 156
Originally Posted by Blackout View Post
If the company was Liquidated when legally, it probably should of been, the Employees would have received their entitlements.

Under Bain , you get 100% of your entitlements (only if it gets voted up), but you can (in all probability) minus 80% from that with the new diminished EA they will be so hot to push through.

So anyone made redundant after the new EA, has effectively been sold out.

Being made redundant or liquidation, (and Jobkeeper is keeping/forcing people from being made redundant), the question is, will FEG and your current EA entitlements be better off in the Liquidation scenario, or, would you be better off voting on this new DOCA with no FEG, and no guarantees for that matter, in the future of your employment?
A) when exactly should it have “legally” been liquidated?
B) Employees get 100% in both the DOCA and, failing that, the Asset Sale Agreement.
C) Why would they lose 80% under a new EA? Are you suggesting new terms would be 20% the current terms? So $60k a year for a 737 captain??
D) Why didn’t you answer Mick above, when he said “Well, buddy, if it's not an error, what is your explanation for how a document dated the 15th includes a reference to another document dated the 16th? Time travel?”
not convenient? Or was it too convenient?
chookcooker is offline  
Old 28th Aug 2020, 13:21
  #1050 (permalink)  
 
Join Date: Aug 2002
Location: there
Posts: 735
I don’t think the plan is in the near term to make anyone redundant after the new EA, IF it gets voted up. And that will be some time away. The current VR for the Narrowbody (737) crew is under the current conditions, with the same exit date as the 330/777 (Oct 3rd). However announced today Is that Jobkeeper will no longer be recredited as annual leave from the end of August. Thus it’s either Jobkeeper or burning Annual leave at 50% not both as is currently available. As expected for this that are left it’s going to be a fight from here on in.
slice is offline  
Old 28th Aug 2020, 13:29
  #1051 (permalink)  
 
Join Date: May 2016
Location: Sunshine Coast
Posts: 297
Originally Posted by Sunfish View Post
Mick, what is your background?
Contract law, supply chain management, program/project management and now in retirement, training for a not-for-profit.

Originally Posted by Sunfish View Post
To put that another way, Deloitte made a breathtaking irrevocable decision once it decided to burn through the provisions for employee entitlements.
That had already been done before Vaughan Strawbridge set foot in the door. Management had already ran the business's cash position down below the employee entitlement threshold before they called in the administrators. The reason that the cash that the business had left had been frozen was almost invariably because of financial covenants in their secured financing. Scurrah, Bryan and Co had already taken the business into insolvency before Deloitte was called in.

And let's be clear on the fact that employee entitlements are not 'provisioned'; they need to be 'accounted' for at the value that would accrue to the business in the event of a winding up but they do not have to be provisioned (as in, monies set aside for a specific purpose).

Originally Posted by Sunfish View Post
What Deloitte may have done is loosely the equivalent to the crooked bank manager who has stolen a million from his employer and lost it gambling. He steals another million, bets double or nothing, and wins. He puts the money back. Has a crime still been committed if he is discovered?
Not even vaguely close to loosely the equivalent, that's just hyperbolic nonsense. Stealing is a crime, nothing in Deloitte's administration was criminal.

And let's just draw a line under this 'it was the employees' money' nonsense. It wasn't. To the extent that the business's remaining cash was anyone's it was the secured creditors. The employees' claim on the business's money is always subordinated to the secured creditors.

You can cue the opening track off Pet Sounds and go through all the rainbow and unicorns hypotheticals until the cows come home but it does not change the fact that the best outcome for employees, both in aggregate and individually, was for the business to be sustained as a going concern and sold. The fact that the administrator needed to borrow money to pay the first fortnight's wages after they took over tells you all you need to know about the position the business was in when they took it over.

Last edited by MickG0105; 28th Aug 2020 at 13:36. Reason: Tidy up
MickG0105 is offline  
Old 28th Aug 2020, 13:40
  #1052 (permalink)  
 
Join Date: Feb 2001
Posts: 229
Originally Posted by chookcooker View Post
A) when exactly should it have “legally” been liquidated?
B) Employees get 100% in both the DOCA and, failing that, the Asset Sale Agreement.
C) Why would they lose 80% under a new EA? Are you suggesting new terms would be 20% the current terms? So $60k a year for a 737 captain??
D) Why didn’t you answer Mick above, when he said “Well, buddy, if it's not an error, what is your explanation for how a document dated the 15th includes a reference to another document dated the 16th? Time travel?”
not convenient? Or was it too convenient?
What are you getting at Chook>?
Blackout is offline  
Old 28th Aug 2020, 13:46
  #1053 (permalink)  
 
Join Date: Aug 2018
Location: Somewhere
Posts: 134
The fact that the administrator needed to borrow money to pay the first fortnight's wages after they took over tells you all you need to know about the position the business was in when they took it over.
So why are Deloitte defensive of the Board in the creditor's report? I would have thought if it was that bad then the Board should have the book thrown at them. It reads a bit like Deloitte think they got a bit unlucky. The real financial situation would have been well known at the high levels for years and once Covid turned up surely the first question as a Board Member would be "are we insolvent"? Sure it came undone quickly but they have had many years of losses it wasn't like the financial situation came out of nowhere. Don't they run "stress tests" on the financials in these large operations?
non_state_actor is offline  
Old 28th Aug 2020, 13:51
  #1054 (permalink)  
 
Join Date: Feb 2001
Posts: 229
There is lots of defence in that report. Cause for concern? Only Preliminary??

Blackout is offline  
Old 28th Aug 2020, 21:29
  #1055 (permalink)  
 
Join Date: Aug 2004
Location: moon
Posts: 0
Mick, thank you for your comment:
And let's just draw a line under this 'it was the employees' money' nonsense. It wasn't. To the extent that the business's remaining cash was anyone's it was the secured creditors. The employees' claim on the business's money is always subordinated to the secured creditors.
I refer you toDeloittes own words:
"Cash at bank on appointment and pre-appointment debtors are classified as circulating assets, and as discussed in section 3.4.4, employees have a priority to be paid out of realisations of circulating assets ahead of secured and unsecured creditors.
Deloittes made a decision.

Furthermore and with respect, I never said Deloittes did anything criminal. However whether what they did was in the best interests of employees, as opposed to other creditors, is another matter.

I also note that as reported this morning, Deloitte is threatening staff with the loss of jobkeeper payments if they don’t approve DOCA.

https://www.theage.com.au/business/c...28-p55qd6.html

‘’You are going to see more of this crap - brutal and ruthless and I suspect you are going to see much more of the same to a level that I don’t even want to talk about.

‘’What comes next? The demise of Scurragh as the new Board focuses exclusively on “exit day” a few years from now, hence there will be no long term planning past that date.

Last edited by Sunfish; 28th Aug 2020 at 21:46.
Sunfish is offline  
Old 28th Aug 2020, 22:34
  #1056 (permalink)  
 
Join Date: May 2016
Location: Sunshine Coast
Posts: 297
Originally Posted by Sunfish View Post
I also note that as reported this morning, Deloitte is threatening staff with the loss of jobkeeper payments if they don’t approve DOCA.
Sunfish, how is it 'threatening staff' to point out the very simple practicalities of the choices ahead of them?

Sale of the business to Bain via a DOCA preserves the existing business and therefore preserves associations with it, such as the AOCs and, importantly for stood down employees, the employee's entitlement to JobKeeper. Those preservations are the reason for preferring a DOCA as the transfer mechanism over a straight asset sale.

You may recall that when JobKeeper was established one of the safeguards to prevent rorting was that businesses registering for it had to have been in existence and employing staff as of 1 March 2020 in order to be eligible. They also had to demonstrate a decline in revenue due to the coronavirus restrictions.

The administrator was pointing out that if the transfer of the business to Bain is not effected under the DOCA then it will occur via an asset sale. An asset sale would mean that a new business entity is created and employment would transfer to that new entity. That would immediately cause an issue for employee entitlements to JobKeeper.

Would you prefer that the staff just be kept in the dark about that sort of stuff?

Originally Posted by Sunfish View Post
’What comes next? The demise of Scurragh ...
His name is Scurrah, no 'g'. And frankly how would his departure be a bad thing?

The bloke had virtually zero airline experience when he came into the job and he then demonstrated an abject inability to get anything meaningfully positive accomplished once he was there. His much talked about 750 headcount 'rightsizing' is as good an example as any of the bloke's inability to get things done. Announced in August last year, and meant to have been completed by last Christmas, come February this year only 140 people had gone. That rightsizing was the business's most significant cost control measure so you'd think that it might have warranted management's attention.

More recently we had his 13 March 'The Group currently has a cash position in excess of $1 billion' pronouncement that turns out to have been a case of providing materially false or misleading information to the ASX in breach of Listing Rule 3.1 and in breach of Section 1309 of the Corporations Act 2001. And we now know that on the day that the administrator has determined the business probably slipped into insolvency, Scurrah was telling the market that 'We are well positioned to weather this storm.' The bloke ran a business that was insolvent for a month without realising it.

Yesterday he was opining that one of the business's big problems is a lack of consistency in partner airline offerings! From yesterday's The Australian article,

One thing that’s been made very clear to us is we need a more consistent level of service across us and our partners so that people know what to expect when they get on a partner airline,” said Mr Scurrah.“It’s been pretty good but it would be different what you got on Singapore Airlines as opposed to what you got on Delta. We want to make sure that’s more consistent
Seriously?! This is what is occupying this bloke's attention at this time?

Frankly, if he's not 'spending more time with his family' by Christmas I'd be very surprised.

Last edited by MickG0105; 28th Aug 2020 at 23:09. Reason: Added CEO commentary
MickG0105 is offline  
Old 28th Aug 2020, 23:03
  #1057 (permalink)  
 
Join Date: Aug 2004
Location: moon
Posts: 0
Mick, thank you for your reply.

I label this a threat because Deloitte allegedly used the word “May” in the video.

Under an asset sale... the employment of staff will transfer to a new entity or company, and that new entity may not be eligible for JobKeeper," Mr Strawbridge said in the video.
To me, that is a direct threat. I note the Commonwealth is silent on this ATM, however we already know Deloitte has been talking to Canberra. Such an issue would depend on how an asset sale was structured. I don’t think Bain and Deloitte would like to see their potential workforce evaporate just yet.


Sunfish is offline  
Old 28th Aug 2020, 23:15
  #1058 (permalink)  
 
Join Date: Sep 2005
Location: NT
Posts: 156
Originally Posted by Blackout View Post
What are you getting at Chook>?
basically your entire post is rubbish.
chookcooker is offline  
Old 28th Aug 2020, 23:18
  #1059 (permalink)  
 
Join Date: Sep 2002
Location: Australia
Posts: 754
Originally Posted by Sunfish View Post
Mick, thank you for your reply.

I label this a threat because Deloitte allegedly used the word “May” in the video.



To me, that is a direct threat. I note the Commonwealth is silent on this ATM, however we already know Deloitte has been talking to Canberra. Such an issue would depend on how an asset sale was structured. I don’t think Bain and Deloitte would like to see their potential workforce evaporate just yet.
I still don’t see how it’s a threat.
Isn’t he just being honest about the potential consequences if the DOCA doesn’t get approved?
The Bullwinkle is offline  
Old 28th Aug 2020, 23:21
  #1060 (permalink)  
 
Join Date: Jun 2020
Location: Melbourne
Posts: 54
Yes, Strawbridge said ‘may not be eligible for Jobkeeper’ I took it as finally getting some accurate information from the source rather than seeing it written in the paper first.
Boeingpilot738 is offline  

Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information -

Copyright © 2021 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.