Cyrus slams administrators

New York hedge fund Cyrus is still angry it was not given enough time to explain its revised — now withdrawn — bid for Virgin.

Cyrus and Bain Capital submitted binding offers for Virgin on Monday, but Cyrus followed up with an improved offer on Thursday. Picture: AAP

New York hedge fund Cyrus is still angry it was not given enough time to explain the revised bid for Virgin Australia it made late this week, prompting it to announce its surprise withdrawal from the bidding process on Friday morning.

While rival Bain Capital was considered to be the frontrunner as the bidding war for Virgin went into its final days, with a higher total valuation package, Cyrus’s withdrawal on Friday, while hitting out at administrator Deloitte’s Vaughan Strawbridge for a “lack of engagement” in the process, underlined its white-hot anger over negotiations.

In a strongly worded statement, Cyrus said it was withdrawing “after thousands of hours of detailed due diligence, business planning and stakeholder engagement … due to lack of engagement by the administrator”.

Cyrus and Bain Capital submitted binding offers for Virgin on Monday, but Cyrus followed up with an improved offer on Thursday. The Cyrus statement complained that the administrators did not engage with it on its improved offer.

Strawbridge told The Australian that his negotiation team did talk with representatives from Cyrus on Thursday.

The New York hedge fund, which has had longstanding links with Richard Branson and the Virgin Group, has been in discussions with Virgin Australia’s management over the past two years after former Virgin America chief executive Jonathan Peachey joined Cyrus as an adviser in 2017.

But it only emerged in public recently when it was announced as a surprise finalist, alongside Bain.

Cyrus was seen as the bidder most favoured by Virgin’s unions, while Bain was always seen as the bidder prepared to offer the most money for the airline, which went into administration on April 21 with debts of $7bn.

Cyrus’s extraordinary statement detailed its accusations against Strawbridge, who has been pushing hard to maintain “competitive tension” in the bidding process, pushing both bidders hard to deliver their best offer this week.

Cyrus said it had delivered its binding offer for Virgin on the morning of June 22 “in line with the administrators’ procedures”. “However, since then, the administrators have not returned calls, emails or meaningfully engaged with Cyrus to progress its offer,” the statement said.

It added it had submitted an improved offer 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”. “This too received no response, other than an acknowledgment of receipt,” it said. “Despite the material improvements put forward, the administrators have still not engaged with Cyrus on its offer. As a result, Cyrus has withdrawn its offer.”

Cyrus founder Stephen Freidheim said he was “disappointed that it had become necessary to withdraw our offer”.

He said Cyrus “firmly believes that the Australian aviation industry has a bright future” and would be willing to submit a new offer for the airline “if the administrators agree to re-engage in good faith”.

But with Virgin under severe financial pressure, burning cash as a result of the COVID-19 travel restrictions, Strawbridge had already made it clear he needed to reach a binding deal by June 30, and he achieved such on Friday with Bain Capital.

In its statement, Cyrus argued its credentials for running Virgin, saying it knew what it took to “grow a successful Virgin airline”.

Cyrus was a co-investor with Sir Richard in the establishment of Virgin America.

“With a 20-year history of investing in airlines and its deep understanding of Virgin’s culture form 12 years of award-winning US airline Virgin America, Cyrus firmly believes it is the best qualified party to take Virgin Australia forward to great success,” it said.

Cyrus said it believed in its business plan, which it said was “developed on a bottom-up, plane-by-plane, route-by-route basis with management that best positions Virgin Australia to return to strength during these difficult times”.

But hours after the statement of disappointment, Strawbridge and Bain signed a binding deal for Bain to take over the airline.

Cyrus was not making any further comment beyond its statement issued on Friday.