Does Virgin Australia’s future rest on Singapore Inc?

Singapore Iic could have a major say in the outcomes for Virgin Australia.

The 11th hour deal lobbed on Wednesday morning by Virgin’s $2 billion bond holders raises the question about whether Singapore Inc will become involved in a revived Virgin 2.0 in one way or another.

One of the funds leading the recapitalisation proposal being put forward by the bondholders – details of which have been leaked but not formally been made public – is Singapore based hedge fund Broad Peak Investment Advisers.

Founded in 2007 by two former employees of Goldman Sachs, Broad Peak is backed by Singapore’s sovereign wealth fund, Temasek.

Temasek is a shareholder in Singapore Airlines, which was a 19.9 per cent shareholder in Virgin before it collapsed into administration on April 21 with debts of almost $7 billion.

Temasek has been run by Ho Ching the wife of Singapore’s Prime Minister Lee Hsien Loong since 2004. Its other investments in Australia include Optus.

Singapore Inc, through its various investment arms, has a longstanding interest in Australia, including the airline industry. And it remains a close follower of the future of Virgin with Singapore Airlines a fierce rival of Qantas.

One way or another, it would not be a surprise if Singapore Inc pops up as a player in some form in connection with a recapitalised or revived Virgin 2.0.

Broad Peak could provide some of the financial firepower which is needed to make the bond holders’ bid a credible option in the face of two serious bids by New York-based hedge fund Cyrus and Bain Capital.

The bond holders are not saying how much exposure Broad Peak has to Virgin.

But the Singapore fund has been a longstanding supporter of the current Virgin management team and plans by chief executive Paul Scurrah to turn a good airline into a profitable airline.

It is not out of the question that if Broad Peak becomes a player in the future of Virgin that Singapore Inc or even Singapore Airlines could come back into the picture.

A major Asian based investor fund, Broad Peak has had a longstanding interest in Australia. It has been a shareholder in infant formula company Bellamy’s and equipment group Coates Hire.

It has also been involved in other significant deals including media group PBL, toll road company BrisConnections and radiology company I-Med.

Separately, Singapore Inc could get a look in at the future of Virgin through another bidder, Cyrus.

In an interview with The Australian two weeks ago, Cyrus adviser Jonathan Peachey, a former senior executive of the Virgin group, did not rule out the idea of Singapore Airlines becoming a financial backer of the Cyrus bid.

“Cyrus is prepared to finance the bid itself,” he told the Australian when asked if it was talking to other potential investors in Virgin including Singapore Airlines.

“We have the funds available to do that.

“That said, there is a lot of interest in participating (in the deal) and we are in discussions with several sources of capital about playing a part in the business.”

“We are very focused on the shareholder relationships being very functional and very like minded.”

“To the extent that we bring partners into the deal, it is very important to Cyrus that those partners are like minded, that they share our vision for the business, which – by the way- is very aligned with management’s vision for the business.”

“It is important for us that they are also prepared to take a long-term view and that they are able to bring value to the table.”

That would describe Singapore Airlines and it would also describe Temasek and Singapore Inc in general. It has a much broader interest in and exposure to Australia than most Australians realise.

When it comes to the future of Virgin, don’t be surprised if Singapore Airlines/Temasek is not a player in there somewhere.

Singapore is a small wealthy island with capital invested in the region and a strong interest in aviation and investment ties with Australia.