Administrator to whittle interest in airline down to three but Queensland sits on sidelines
There were eight interested parties who registered to potentially buy out Virgin Australia at the close of business on Friday — but despite the hype, the Queensland government wasn’t one of them.
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Administrators overseeing the sale of Virgin Australia say they have firm interest from eight separate parties considering buying the ailing airline.
Deloitte Restructuring Services partner Vaughan Strawbridge, who is acting as lead administrator at Virgin, said he was confident of receiving eight offers for the nation’s second-biggest airline.
His comments were made just hours before non-binding, indicative offers were formally due at the close of business on Friday.
The sales push comes amid reports the airline is down to its last $100 million and Deloitte will be required to source extra funds before any new owner takes control.
Bidders are understood to include Canadian infrastructure investor Brookfield, US private equity firm Bain, and a consortium involving AustralianSuper and private equity firm BGH.
Indian billionaire Rahul Bhatia, who co-founded Indian budget carrier IndiGo, has also said he would lodge a bid.
Although the Queensland government this week announced plans to contribute a possible $200 million to a bid, it sat out the opening round.
Its state investment agency, Queensland Investment Corporation, will instead closely monitor the opening bids with a view to teaming up with a consortium willing to keep Virgin’s headquarters in Brisbane.
Mr Strawbridge said Deloitte would assess the first round of bids over coming days and whittle them down to a shortlist of three.
Binding offers will be required by June 12 and Deloitte wants a sale wrapped up by the end of that month.
“Up to now we’ve certainly seen a high level of interest from a significant number of high-quality parties, many of whom are capable of completing a transaction of this size and complexity,” Mr Strawbridge said. “Nearly 20 have had access to the data room; and eight of these have been sufficiently advanced in their interest, and in the business as a whole, that they have been provided with the forward-looking Virgin 2.0 business plan.
“There is plenty of competitive tension, and that’s what’s needed to drive the best outcome, an outcome that preserves as many jobs as possible, and the best result for all creditors.”
Virgin, which employs 10,000 workers and supports another 6000 jobs, was placed into voluntary administration on April 21 after the coronavirus pandemic up-ended both the domestic and international travel markets. The loss-making airline owes $6.8 billion.
It has continued to operate a basic schedule of government-subsidised flights during its administration.
Virgin had already stood down 8000 workers, suspended all international flights and 90 per cent of its domestic services before entering administration.
Mr Strawbridge said a wide range of cost savings had been identified during the administration process.
Deloitte will work closely with the three short-listed parties, providing access to more detailed business and operational information, management presentations and workshops, and key stakeholder interactions from across all areas of the business.
“We are pursuing an aggressive process but it’s one we are confident we can achieve, and our objective remains to deliver a revitalised, viable and profitable airline under new ownership,” Mr Strawbridge said.
Virgin’s owners include Etihad Airways, with a 21 per cent stake, Singapore Airlines, China’s Nanshan Group and HNA Group, with about 20 per cent each, and British billionaire Sir Richard Branson, with a 10 per cent stake.
The federal government wants a strong competitor to Qantas Airways but has backed away from taking a stake in Virgin.
Airline veteran Sir Rod Eddington has suggested a rebirthed Virgin needs to go back to being a basic budget carrier to be successful. Sir Rod is a former chief executive of Cathay Pacific, British Airways and Ansett Airlines.
Meanwhile, members of Virgin’s loyalty program, Velocity Frequent Flyer, can now redeem their points, but only for flights from September 1.
The airline’s Rewards Store, where points could be used to pay for gift vouchers, wine, hotels, consumer electronics and other goods, remains frozen.