Brookfield continues its push for Virgin Australia

Canadian infrastructure giant Brookfield Asset Management may not yet be out of the race for Virgin Australia.

Brookfield is still keen on landing Virgin Australia. Picture: AFP

Canadian infrastructure giant Brookfield Asset Management may not yet be out of the race for Virgin Australia, with revelations the company is continuing talks with administrator Vaughan Strawbridge.

The Weekend Australian understands that while Brookfield dropped out of the formal bidding process last weekend with several concerns about the process, including the tight time frame for the bids and Virgin’s financial position, it remained interested in becoming involved in a bid.

Virgin Australia was placed into administration on April 21 with debts of almost $7bn.

Deloitte this week narrowed down the field of contenders for Virgin to four short-listed parties: a consortium involving BGH Capital and the $170bn Australian­Super, Bain Capital, and two US bidders, New York based Cyrus and Phoenix Arizona-based airline investor Indigo Partners.

This followed moves by nine parties, including Brookfield, which lodged “indicative non-binding” bids for Virgin last Friday.

Narrowed down

The list was narrowed down to four on Monday — a list that did not include Brookfield, at its request, because of its concerns about the process.

But Brookfield has made it clear it is still interested in being involved if it can.

It remains unclear whether it could re-enter the current process as a formally short-listed bidder, particularly if it still has concerns over the process. But the fact that it has apparently kept the dialogue open with Deloitte signals that it is not out of the process altogether.

A spokesman for Deloitte would not comment on the reports that Brookfield was still in the running. Deloitte is in discussions with the four bidders, who will be cut to two on Friday next week.

Virgin Australia CEO Paul Scurrah spent Thursday and Friday making presentations to the bidders, outlining his vision for a Virgin 2.0 focused on the core domestic business and Velocity frequent-flyer program.

Many questions were asked of Mr Scurrah, who remains confident the airline will emerge from administration as a leaner and fitter competitor to Qantas.

The final two parties will be expected to lodge binding bids by June 12, with a final decision due by the end of June.

Brookfield was always considered a strong contender for Virgin but declined to go ahead to the next stage, which began this week, as a result of several concerns.

Mr Strawbridge has always made it clear he would like to see “competitive tension” in the bidding process and would not rule out interested parties becoming involved in the sales process at some later stage.

Other developments

In other developments, Deloitte reported to the ASX on Friday that US courts had recognised Virgin Australia’s administration, which would protect the airline from legal action by US creditors.

Bondholders, who are owed almost $2bn, met to discuss their concerns and unions continued to demand the federal government intervene to rescue the airline.

With just over $100m cash left, Virgin Australia is still facing liquidation by the end of July if a financial lifeline cannot be found.

The Transport Workers Union urged Canberra to follow the German government, which announced a $15bn rescue package for Lufthansa. In return, German taxpayers would take a 25 per cent stake in the business and seats on the airline’s supervisory board.

TWU national secretary Michael Kaine said the model should provide a plan for the federal government to save Virgin.

“Governments around the world are stepping in and supporting their aviation sectors because they recognise the strategic importance of this critical infrastructure,” he said. “Few countries are as dependent on aviation as Australia and yet the federal government is nowhere to be seen.”