Bain Capital to buy Virgin Australia after shock Cyrus exit

Bain Capital has signed a deal to buy Virgin Australia hours after rival Cyrus made the shock announcement it was withdrawing its bid.

Cyrus’ withdrawal leaves the door open for Bain’s rival bid. Picture: AAP

Virgin Australia has been sold to Boston-based private equity fund Bain Capital, with administrators confirming a “sale and implementation deed” had now been signed.

The announcement came hours after the withdrawal of rival bidder Cyrus Capital, which said it had decided to pull out “due to a lack of engagement by the administrator”.

Deloitte’s Vaughan Strawbridge, who was appointed as administrator to Virgin Australia on April 21, said the transaction supported the current management team led by Paul Scurrah and its improvement plan for the airline, and the retention of thousands of jobs.

The deal also carried forward all travel credits and Velocity frequent flyer booked flights, honoured all employee entitlements and provided a significant injection of capital to see the business recapitalised and well positioned for the future.

“This is an important milestone and a significant achievement,” he said.

“Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia’s second airline, thousands of employees and their families and ensure Australia continues to enjoy the benefits of a competitive aviation sector.”

Virgin Australia CEO Paul Scurrah has declared the deal with Bain Capital to buy the embattled airline “a great day” for the carrier.

He said it was always their goal to bring Virgin Australia out of administration as quickly as possible and in a stronger financial position.

“This announcement brings us a step closer to that,” said Mr Scurrah.

“Bain’s investment will cement our future as a major Australian carrier, secure thousands of direct and indirect jobs and ensure we can continue to bring competition to millions of customers for many years to come.”

Bain is committed to retaining the Virgin brand despite the multi-million cost.

UK-based Virgin Group CEO Josh Bayliss said they were pleased Deloitte had run such an effective process to support the recapitalisation of Virgin Australia.

“We have been in discussions with Deloitte throughout the process and believe the investment envisaged by the administrators and Bain is a positive outcome for the company, its creditors and its employees,” Mr Bayliss said. He also acknowledged the “great efforts of Cyrus Capital to seek a solution for Virgin Australia over the past two months”.

Mr Strawbridge said no return to shareholders was expected and it was not possible to determine the estimated return to creditors, who are owed $6.8bn.

He also revealed the final offers received from Bain and Cyrus were not the only ones received, with “several proposals” made including one from representatives of the airline’s 6000-plus bondholders.

Despite the claim by Cyrus that Mr Strawbridge had failed to return calls or emails after it made its final offer, he said administrators had been focused on achieving the best possible outcomes for all stakeholders.

“In just over eight weeks, this is a very positive outcome. We have certainly been heartened by the levels of interest shown by parties, despite the prevailing COVID-induced market conditions, how our final two groups have approached their bids, and how support for the business has come from so many quarters,” he said.

“This result could not have been achieved without the support and hard work of the Virgin Australia team, who we have had the privilege of working with over the last eight to nine weeks. We would also like to thank them for their ongoing support and engagement.”

The Transport Workers Union was looking forward to working with Bain but national secretary Michael Kaine said the process still needed major government involvement.

“The federal government must stabilise the aviation industry with Aviation Keeper, an extension of support beyond September for all aviation workers,” Mr Kaine said.

Cyrus’ dramatic withdrawal

News of the Bain deal came after its rival, New York hedge fund Cyrus, dramatically withdrew its offer for Virgin Australia due to what is said was a “lack of engagement by the administrator”.

The angry statement by Cyrus was a slap in the face of Mr Strawbridge, who was accused of “not returning calls, emails or meaningfully engaging with Cyrus to progress its offer”.

The statement referred to the “thousands of hours of detailed due diligence, business planning and stakeholder engagement” that had gone into the offer.

Cyrus said it had increased its offer for Virgin on Thursday morning in a “package of value improvements and other compelling measures to increase the value of the transaction, improve the return to unsecured bondholders and deliver more certainty for the administrators”.

But it complained that “this too had receive no response” except an acknowledgment of its receipt. Cyrus, which has had a long-time link with Richard Branson, said it was withdrawing its offer as of Friday morning.

The move comes after Qantas has announced on Thursday it would cull the jobs of 6000 of its workers.

The Bain consortium has been advised by former Jetstar chief executive Jayne Hrdlicka, raising speculation that she could play a role in a Virgin 2.0

Qantas chief executive Alan Joyce said Thursday that his airline had a cash burn of some $40 million a week.

Virgin was placed into administration on April 21 with debts of some $7 billion.

The Cyrus withdrawal will mean that Mr Strawbridge will now put a proposal to creditors at their meeting in mid August which will back the Bain bid.

But the move will be treated with some caution by Virgin’s workers as Cyrus was seen as the bidder which would have been the most sympathetic to its staff.