20 buyers now circling Virgin Australia
“The assets” let’s look at them.
- A brand recognised throughout Australia. I will call that Marketing capital.
- A business conglomerates of staff and operational processes and systems (including IT and HR) that ensure Virgin is a going concern, even if it is hibernating now.
- Supplier/creditor/customer channels that are mature and workable.
- An AOC and the systems and capability to maintain the same.
- Airport chech in facilities and infrastructure around Australia.
- A considerable market share of domestic travel.
- Motivated and attractive workforce (in the marketing sense)
Folks, non of this stuff came cheap. None of this stuff carries a book value, no matter what accounting principles Deloittes dreams up. There is the core of the argument between Bain, Deloittes and the bond holders in my opinion.
- Bain is naturally trying to get ownership by paying for the rusty filing cabinets and office chairs - with the rest thrown in for free.
- The Bond holders see the reverse - the huge value of the non financial assets compared to the financial debt - which after all is just money that can and will be supplied by anyone, any time and quickly.
- Deloittes, being a bunch of accountants, however you want to put it, cannot and will not appreciate the non financial assets. In addition, I have observed repeatedly that there is precisely ZERO forensic aviation accounting talent outside Qantas and Virgin, so Deloittes are in the dark about the value of much of Virgin.
My assumption is that Deloittes have been rolled by Bain. Deloittes don’t have the skills to work on this scale, Bain does this every day of the week.
‘’So here is my conclusion: The Bain deal is secret because it values the REAL assets of the business at virtually zero and if it saw the light of day, anyone with aviation experience would know it and realise that Deloittes have been comprehensively outplayed by Bain, who stand to make billions out of Deloittes stupidity. This in itself is no sin, but my concern is that the Bain deal will leave Australia worse off on many levels.
I saw a similar situation when Saint Margaret Jackson and Geoff Dixon presided over the attempted privatisation of Qantas. They characterised Qantas as a rusty old beat up Holden ready for the wreckers. The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
So to be optimistic for once, if Virgin got some financial breathing space, courtesy of the bond holders, an enlightened Board who actually have relevant experience instead of being politically correct dummies and a tough but intelligent and fair management - again not steeped in politically correct bull****, then a restructured Virgin has a good future.
- A brand recognised throughout Australia. I will call that Marketing capital.
- A business conglomerates of staff and operational processes and systems (including IT and HR) that ensure Virgin is a going concern, even if it is hibernating now.
- Supplier/creditor/customer channels that are mature and workable.
- An AOC and the systems and capability to maintain the same.
- Airport chech in facilities and infrastructure around Australia.
- A considerable market share of domestic travel.
- Motivated and attractive workforce (in the marketing sense)
Folks, non of this stuff came cheap. None of this stuff carries a book value, no matter what accounting principles Deloittes dreams up. There is the core of the argument between Bain, Deloittes and the bond holders in my opinion.
- Bain is naturally trying to get ownership by paying for the rusty filing cabinets and office chairs - with the rest thrown in for free.
- The Bond holders see the reverse - the huge value of the non financial assets compared to the financial debt - which after all is just money that can and will be supplied by anyone, any time and quickly.
- Deloittes, being a bunch of accountants, however you want to put it, cannot and will not appreciate the non financial assets. In addition, I have observed repeatedly that there is precisely ZERO forensic aviation accounting talent outside Qantas and Virgin, so Deloittes are in the dark about the value of much of Virgin.
My assumption is that Deloittes have been rolled by Bain. Deloittes don’t have the skills to work on this scale, Bain does this every day of the week.
‘’So here is my conclusion: The Bain deal is secret because it values the REAL assets of the business at virtually zero and if it saw the light of day, anyone with aviation experience would know it and realise that Deloittes have been comprehensively outplayed by Bain, who stand to make billions out of Deloittes stupidity. This in itself is no sin, but my concern is that the Bain deal will leave Australia worse off on many levels.
I saw a similar situation when Saint Margaret Jackson and Geoff Dixon presided over the attempted privatisation of Qantas. They characterised Qantas as a rusty old beat up Holden ready for the wreckers. The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
So to be optimistic for once, if Virgin got some financial breathing space, courtesy of the bond holders, an enlightened Board who actually have relevant experience instead of being politically correct dummies and a tough but intelligent and fair management - again not steeped in politically correct bull****, then a restructured Virgin has a good future.
I agree that the Virgin brand is categorically worth something, as is the fact it’s a current business, has the systems in place to continue operating as a significantly sized airline, has market share and has a motivated workforce. And you are also right in that Deloitte perhaps do not value that as you should - but how do you value those things in a company that has entered administration and whose core business has simply evaporated during the midst of a global pandemic? Even the question of market share is an interesting one, because whilst Virgin May have 35ish per cent of the market, no one knows what the market size and composition at the end of this will be.
You’ve been fairly critical of Deloitte so far, perhaps fairly so, but perhaps not.
One of your points above states the fact that Virgin is a going concern even if it’s hibernating. And this is the issue - Virgin was going to run out of cash during the administration (around 2-3 weeks ago if reports were accurate). And this was one of the main problems Deloitte had - they needed to source funds to continue operating (albeit in a hibernating state) because if it had to shut the doors on all operations, it would have been very difficult to restart for a number of reasons. So whilst Deloitte put the business up for sale to multiple different organisations, the one it chose was the one that was happy to tip in quite a lot of cash to keep the place running. Admittedly this information has come from Deloitte - but it seems credible to me. And they have been quite clear that the other bidders were not willing to put their hands in their pockets immediately to solve this fairly significant issue.
I don’t think any of the deal is secret - it will be outlined in the report to creditors prior to the second meeting of creditors due next month.
Why do you think the deal will leave Australians worse off? I think ultimately the Virgin that comes out of administration is going to be in more or less the same form regardless of who any of the other potential buyers throughout the process ended up being the final purchaser. If you’re talking about the unsecured bond holders (the mum and dad investors) then perhaps you are right - they obviously will be worse off. But their plan of essentially recapitalising Virgin by refloating it on the ASX seemed crazy to me - who in their right minds would be buying shares in Virgin 2.0 given their previous history, the fact they haven’t paid a dividend in over a decade, the fact the domestic market is absolutely buggered and will be until state governments in this country stop the pissing contest that they are all in. Qantas’ recent equity raising should give an idea of the markets stomach for investing in airlines at the moment.
You have far more business acumen than me, so genuinely interested in you expanding on your thoughts...
“The assets” let’s look at them.
- A brand recognised throughout Australia. I will call that Marketing capital.
- A business conglomerates of staff and operational processes and systems (including IT and HR) that ensure Virgin is a going concern, even if it is hibernating now.
- Supplier/creditor/customer channels that are mature and workable.
- An AOC and the systems and capability to maintain the same.
- Airport chech in facilities and infrastructure around Australia.
- A considerable market share of domestic travel.
- Motivated and attractive workforce (in the marketing sense)
Folks, non of this stuff came cheap. None of this stuff carries a book value, no matter what accounting principles Deloittes dreams up.
- A brand recognised throughout Australia. I will call that Marketing capital.
- A business conglomerates of staff and operational processes and systems (including IT and HR) that ensure Virgin is a going concern, even if it is hibernating now.
- Supplier/creditor/customer channels that are mature and workable.
- An AOC and the systems and capability to maintain the same.
- Airport chech in facilities and infrastructure around Australia.
- A considerable market share of domestic travel.
- Motivated and attractive workforce (in the marketing sense)
Folks, non of this stuff came cheap. None of this stuff carries a book value, no matter what accounting principles Deloittes dreams up.
Facilities, infrastructure, IT systems are all valued and carried as assets under Property, Plant and Equipment (or a similarly named line) on the balance sheet.
Further, the balance sheet will carry a line under Assets called Intangibles (or Intangible Assets) that assigns a value to things like market share, brand presence and the like.
And Deloitte doesn't have to dream any accounting practices up - Accounting Standard AASB 138 Intangible Assets has been around since 2004 to deal with just those items.
And what is the 'huge value' of the non financial assets? By any ordinary measure the value of a business as an ongoing concern is determined by either its earning capacity or its free cash flow yield. Just how much money do you expect that Virgin will clear as profits over the next few years? Or how about its free cash flow?
- Deloittes, being a bunch of accountants, however you want to put it, cannot and will not appreciate the non financial assets. In addition, I have observed repeatedly that there is precisely ZERO forensic aviation accounting talent outside Qantas and Virgin, so Deloittes are in the dark about the value of much of Virgin.
But sure, yes, let's just assume that they're just a bunch of dumb yokels making it up as they went along.
I saw a similar situation when Saint Margaret Jackson and Geoff Dixon presided over the attempted privatisation of Qantas. They characterised Qantas as a rusty old beat up Holden ready for the wreckers. The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
They characterised Qantas as a rusty old beat up Holden ready for the wreckers.
The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
After APA withdrew their bid Qantas had six or seven months trading above the $5.60 offer price and then down she came. And down she stayed. First oil sky-rocketed (the opposite of collapsing) from May 2007 - July 2008. And then the GFC. And then oil back up again.
The share price would not get back up to the APA offer price of $5.60 until July 2017, nearly a decade after the final offer.
So to be optimistic for once, if Virgin got some financial breathing space, courtesy of the bond holders, an enlightened Board who actually have relevant experience instead of being politically correct dummies and a tough but intelligent and fair management - again not steeped in politically correct bull****, then a restructured Virgin has a good future.
Do you think that a pair of Singaporean investment fund managers are going to be more patient and gentle masters than Bain?
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Nobody at this stage knows how Bain have valued the business or what they've paid for it
Plus they have put $ 125 m to keep it afloat until the creditors decide how to proceed. I don't understand how anyone could put this amount of money into a project without a minimum guaranteed return - which implies that Deloittes have effectively committed to a Bain deal.
How could anyone possibly float an airline as a listed company in this economic environment - pie in the sky. The bondholders so called 60+ cent return is an unreachable pipe dream.
If this goes south at the creditors meeting, Bain will have first option on all assets as the liquidation begins.
Barring any realistic court action, either way, Bain wins.
Surely the vote will pass as the largest creditor are the staff! Why would they vote themself out of a job
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That is my understanding of it. If more than 50% of the first group vote for the proposal and more than 50% of the value group vote against it then it reverts to the chairman of the meeting. I don't understand how having a second option on the card actually matters, unless there are issues with dilution of the vote and how that may change the outcome. I guess if the populous vote for option 1 and those who hold the value vote for option 2 which option should the chairman pick and why? That might be a concern.
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That is my understanding of it. If more than 50% of the first group vote for the proposal and more than 50% of the value group vote against it then it reverts to the chairman of the meeting. I don't understand how having a second option on the card actually matters, unless there are issues with dilution of the vote and how that may change the outcome. I guess if the populous vote for option 1 and those who hold the value vote for option 2 which option should the chairman pick and why? That might be a concern.
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Sure Bain put in $125 million. It did this out of the goodness of its heart.
Mick, yes, there are standards for accounting valuations of intangibles and all sorts of other stuff. You missed my observation on the lack of forensic aviation accounting capabilities in Australia. As for Deloittes international connections, I used to play that tune when I worked at Coopers & Lybrand. The reality is that locals want to maximise billable hours, not feed them to New York.
Local Deloittes accountants wouldn’t know the difference between a $300,000 turbine disk and scrap metal. That is just the start of it, speaking as someone who has been both sides of the green pen.
The deal is secret because it’s legalised robbery, period.
Mick, yes, there are standards for accounting valuations of intangibles and all sorts of other stuff. You missed my observation on the lack of forensic aviation accounting capabilities in Australia. As for Deloittes international connections, I used to play that tune when I worked at Coopers & Lybrand. The reality is that locals want to maximise billable hours, not feed them to New York.
Local Deloittes accountants wouldn’t know the difference between a $300,000 turbine disk and scrap metal. That is just the start of it, speaking as someone who has been both sides of the green pen.
The deal is secret because it’s legalised robbery, period.
Sure Bain put in $125 million. It did this out of the goodness of its heart.
Mick, yes, there are standards for accounting valuations of intangibles and all sorts of other stuff. You missed my observation on the lack of forensic aviation accounting capabilities in Australia. As for Deloittes international connections, I used to play that tune when I worked at Coopers & Lybrand. The reality is that locals want to maximise billable hours, not feed them to New York.
Local Deloittes accountants wouldn’t know the difference between a $300,000 turbine disk and scrap metal. That is just the start of it, speaking as someone who has been both sides of the green pen.
The deal is secret because it’s legalised robbery, period.
Mick, yes, there are standards for accounting valuations of intangibles and all sorts of other stuff. You missed my observation on the lack of forensic aviation accounting capabilities in Australia. As for Deloittes international connections, I used to play that tune when I worked at Coopers & Lybrand. The reality is that locals want to maximise billable hours, not feed them to New York.
Local Deloittes accountants wouldn’t know the difference between a $300,000 turbine disk and scrap metal. That is just the start of it, speaking as someone who has been both sides of the green pen.
The deal is secret because it’s legalised robbery, period.
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ex The SMH: Virgin workers dispute reignites ahead of key vote hearing........
Article link: https://www.smh.com.au/business/comp...j.htmlExtract:
Virgin Australia's owner-in-waiting Bain Capital faces a fracturing relationship with one of the airline's key unions, which could threaten support for the sale at next month's creditors meeting and jeopardise $200 million in government assistance offered to get the airline flying again.
The spat emerged ahead of a hearing in the NSW Federal Court on Monday, in which two major Virgin bondholders will try to force administrator Deloitte to put their alternative proposal for Virgin to a vote of creditors on September 4.
Virgin bondholders will be in court on Monday pushing for their proposal for the airline to be put to a vote for creditors.
With Virgin and its unions starting negotiations over a restructure announced earlier this month which will see 3000 jobs go, or a quarter of its workforce, Transport Workers Union national secretary Michael Kaine said on Sunday that the union remained concerned about Bain's intention to appoint former Qantas executive and Jetstar boss Jayne Hrdlicka as a board member at Virgin.
He said the response the union had received on the make up of the board was unsatisfactory, which has the potential to threaten workers' support for the Bain deal at the second creditors meeting next month. Virgin's workers will be a crucial voting block at the meeting, accounting for around 9000 of its 12,000 creditors.
The board of the new Virgin must explicitly recognise that staff are critical to this mission and emphasise co-operation, rather than confrontation," Mr Kaine said.
"Our members are committed to rebuilding Virgin, but we will not expose them to a crude rip-off where jobs and conditions are decimated."
A spokesman for Bain said the firm was surprised by the TWU's comments given the "many hours" of constructive conversation it had with the union about Virgin's future. He reiterated Bain's commitment to treat workers fairly and honour all entitlements.
Unions, and the TWU in particular, have objected to the involvement of Ms Hrdlicka as an advisor to Bain over fears she would bring a budget airline mindset or a "Qantas culture" of industrial relations hard ball to Virgin.
Queensland treasurer Cameron Dick said on Sunday that the state's government pledged of $200 million in equity, working capital and financial incentives was to support Virgin's relaunch, and that he expected its new owners to share its vision to secure and maximise jobs in the state.
"Our expectation is that Virgin remains a full service airline, servicing a full network in Queensland, and with a good relationship with its workforce," Mr Dick said in a statement. "We expect board members to share that vision and governance to reflect it."
One Queensland government source said the government was concerned by the apparent deterioration of relations with workers and that the $200 million in support could be withdrawn.
"If Bain can’t get a deal with the workers, then it won’t get a deal with the Queensland government," said the source, who requested anonymity to discuss confidential matters.
On Monday major Virgin bondholders, Broad Peak Investment Advisors and Tor Investments, will push to have their alternative plan for Virgin put to a vote of creditors next month alongside the Bain deal.
They want the owners of $2 billion worth of Virgin bonds to swap their debt for shares in Virgin, which would remain listed on the ASX, and contribute to a $800 million capitalisation rather than see the airline sold to Bain.
However, Virgin's administrator Deloitte has dismissed their play for the airline, saying their previous offers have been "highly conditional" and without proven source of funding. In any event, Deloitte says it cannot entertain another offer for its signed a binding sale deed with Bain on June 26.
rgds
S28- BE
Virgin workers dispute reignites ahead of key vote hearing
Virgin workers dispute reignites ahead of key vote hearing
By Patrick Hatch
August 17, 2020 — 12.00amVirgin Australia's owner-in-waiting Bain Capital faces a fracturing relationship with one of the airline's key unions, which could threaten support for the sale at next month's creditors meeting and jeopardise $200 million in government assistance offered to get the airline flying again.
The spat emerged ahead of a hearing in the NSW Federal Court on Monday, in which two major Virgin bondholders will try to force administrator Deloitte to put their alternative proposal for Virgin to a vote of creditors on September 4.
Virgin bondholders will be in court on Monday pushing for their proposal for the airline to be put to a vote for creditors.
With Virgin and its unions starting negotiations over a restructure announced earlier this month which will see 3000 jobs go, or a quarter of its workforce, Transport Workers Union national secretary Michael Kaine said on Sunday that the union remained concerned about Bain's intention to appoint former Qantas executive and Jetstar boss Jayne Hrdlicka as a board member at Virgin.
He said the response the union had received on the make up of the board was unsatisfactory, which has the potential to threaten workers' support for the Bain deal at the second creditors meeting next month. Virgin's workers will be a crucial voting block at the meeting, accounting for around 9000 of its 12,000 creditors.
The board of the new Virgin must explicitly recognise that staff are critical to this mission and emphasise co-operation, rather than confrontation," Mr Kaine said.
"Our members are committed to rebuilding Virgin, but we will not expose them to a crude rip-off where jobs and conditions are decimated."
A spokesman for Bain said the firm was surprised by the TWU's comments given the "many hours" of constructive conversation it had with the union about Virgin's future. He reiterated Bain's commitment to treat workers fairly and honour all entitlements.
Unions, and the TWU in particular, have objected to the involvement of Ms Hrdlicka as an advisor to Bain over fears she would bring a budget airline mindset or a "Qantas culture" of industrial relations hard ball to Virgin.
Queensland treasurer Cameron Dick said on Sunday that the state's government pledged of $200 million in equity, working capital and financial incentives was to support Virgin's relaunch, and that he expected its new owners to share its vision to secure and maximise jobs in the state.
"Our expectation is that Virgin remains a full service airline, servicing a full network in Queensland, and with a good relationship with its workforce," Mr Dick said in a statement. "We expect board members to share that vision and governance to reflect it."
One Queensland government source said the government was concerned by the apparent deterioration of relations with workers and that the $200 million in support could be withdrawn.
"If Bain can’t get a deal with the workers, then it won’t get a deal with the Queensland government," said the source, who requested anonymity to discuss confidential matters.
On Monday major Virgin bondholders, Broad Peak Investment Advisors and Tor Investments, will push to have their alternative plan for Virgin put to a vote of creditors next month alongside the Bain deal.
They want the owners of $2 billion worth of Virgin bonds to swap their debt for shares in Virgin, which would remain listed on the ASX, and contribute to a $800 million capitalisation rather than see the airline sold to Bain.
However, Virgin's administrator Deloitte has dismissed their play for the airline, saying their previous offers have been "highly conditional" and without proven source of funding. In any event, Deloitte says it cannot entertain another offer for its signed a binding sale deed with Bain on June 26.
S28- BE
Last edited by Section28- BE; 17th Aug 2020 at 01:35. Reason: Formatting... (/wink).
You said,
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Today’s 2.15 hearing, can anyone shed any light on what it’s actually for? To allow the Bondholders access to creditors or to allow them to present their DOCA on 4th of September? I thought the judge had already ruled on the latter?
There has not been a specific ruling on that point yet. What Middleton J had previously noted was that section 439CA of the Corporations Act 2001 authorises creditors to approve a DOCA which is different from the one accompanying the notice of meeting.
The more significant point not yet addressed at all is whether an alternative DOCA can undo the administrator's decision to sell the business under section 437A. It will come down to duelling rights - does the creditors' right under 439CA to approve a DOCA that is different to the one proposed by the Administrator trump the Administrator's right under 437A to sell the company's business? It's not a trivial matter and goes to the Administrator's role and rights. 437A is pretty unambiguous.
CORPORATIONS ACT 2001 No. 50, 2001 - SECT 437A
Role of administrator(1) While a company is under administration, the administrator:
(a) has control of the company's business, property and affairs; and
(b) may carry on that business and manage that property and those affairs; and
(c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and
(d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.
(2) Nothing in subsection (1) limits the generality of anything else in it.
Last edited by MickG0105; 17th Aug 2020 at 03:23. Reason: Formatting of quote
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Good info MickG0105 on today's proceedings and meanwhile across the border an interesting tussle is brewing between Anastasia's QIC and Jayne's Bain.
In the QLD corner we have the TWU. Roll up, If Jayne's in then Anastasia's out. If Jayne's out then Anastasia is in.
All about 200mil, jobs in QLD, headquarters in BNE. Well their's the promotion any guesses on how may rounds this will go.
In the QLD corner we have the TWU. Roll up, If Jayne's in then Anastasia's out. If Jayne's out then Anastasia is in.
All about 200mil, jobs in QLD, headquarters in BNE. Well their's the promotion any guesses on how may rounds this will go.
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It's to get a ruling on whether the bondholders have a statutory right to put an alternative DOCA and, if they do, how that should be managed.
There has not been a specific ruling on that point yet. What Middleton J had previously noted was that section 439CA of the Corporations Act 2001 authorises creditors to approve a DOCA which is different from the one accompanying the notice of meeting.
The more significant point not yet addressed at all is whether an alternative DOCA can undo the administrator's decision to sell the business under section 437A. It will come down to dualling rights - does the creditors' right under 439CA to approve a DOCA that is different to the one proposed by the Administrator trump the Administrator's right under 437A to sell the company's business? It's not a trivial matter and goes to the Administrator's role and rights. 437A is pretty unambiguous.
There will be a lot of administrators paying very close attention to this hearing. If it doesn't go Deloitte's way there would have to be a very good chance that it will be appealed.
There has not been a specific ruling on that point yet. What Middleton J had previously noted was that section 439CA of the Corporations Act 2001 authorises creditors to approve a DOCA which is different from the one accompanying the notice of meeting.
The more significant point not yet addressed at all is whether an alternative DOCA can undo the administrator's decision to sell the business under section 437A. It will come down to dualling rights - does the creditors' right under 439CA to approve a DOCA that is different to the one proposed by the Administrator trump the Administrator's right under 437A to sell the company's business? It's not a trivial matter and goes to the Administrator's role and rights. 437A is pretty unambiguous.
There will be a lot of administrators paying very close attention to this hearing. If it doesn't go Deloitte's way there would have to be a very good chance that it will be appealed.