Don’t expect much, Virgin Australia creditors told

Virgin Australia’s creditors owed $6.8bn by the airline have been told they should not expect to be repaid in full.

QIC chief executive Damien Frawley. Picture: Lyndon Mechielsen

More than 15,000 people owed $6.8bn by Virgin Australia have been warned not to expect to be repaid in full following the sale of the airline to US private equity firm Bain Capital.

Administrator Deloitte made the statement to the ASX as part of a notice to shareholders that they would receive no distribution for their shares.

The declaration, signed by joint administrator Richard ­Hughes, also noted “as at the date of this correspondence we do not expect there will be sufficient recoveries to repay creditors in full”.

Virgin Australia went into voluntary administration on April 21 with debts of $6.8bn owed to employees, bondholders, aircraft lessors, landlords such as airports and suppliers.

Bain has undertaken to honour all prepaid ticket holders with Virgin Australia and recognise Velocity frequent-flyer points, as well as protect the entitlements of employees worth $450m.

Mr Hughes said depending on individual tax circumstances, shareholders could rely on the declaration to claim capital losses in the income year in respect of shareholdings in Virgin Australia.

The airline’s shares last traded at 8.6 cents a share on the ASX. Just over 90 per cent of the carrier was owned by foreign companies including Etihad Airways, Singapore Airlines, the Virgin Group and Chinese conglomerates Nanshan and HNA Group. Under the deal with Bain, Virgin Australia was expected to re-emerge from administration as a leaner, single aircraft type airline focused on a tight domestic network.

The company also committed to retaining the airline’s Brisbane base, following an agreement with the Queensland government’s investment arm, QIC.

On Tuesday, QIC chief executive Damien Frawley told an internet round table it welcomed the choice of Bain as the buyer.

“We were very happy last week when Bain were given the gong to be carried through to the next stage of the process to the creditors meeting,” Mr Frawley said.

He confirmed the Queensland government had agreed to invest as much as $200m in the winning bidder for Virgin, including taking a potential equity stake in the airline, as part of its objective to keep its headquarters in Brisbane to preserve jobs and regional air routes in the state.

Mr Frawley said several economic objectives would be met as a result of the government’s decision to provide financial support for the winning bidder, including the retention of jobs in the state. “It is also about supporting a very big piece of the Queensland economy, which is tourism,” he said.

“Having a competitive air space and competitive airlines to serve that was also a big part of what the government wanted to achieve. It was about servicing groups that needed to be serviced to support regions and industries in those regions.”