Furious Virgin Australia bondholders decry broken promises and $625m demand

Virgin Australia’s bondholders say administrators reneged on promises and then made a surprise $625m demand to stay in the game.

Virgin Australia aircraft parked at Brisbane Airport. Picture: Patrick Hamilton

Court documents filed by two Virgin Australia bondholders have revealed the airline’s administrators wanted offers for the carrier to be supported by a payment of $625m.

The revelation comes as Singapore’s Broad Peak Investment Advisers and Hong Kong Tor Investment Managers try to access details of a confidential deal signed by the administrators with Bain Capital.

The bondholders are upset their own proposal to recapitalise the airline was rejected by the administrators, despite assurances made throughout the sale process.

Documents lodged in the Federal Court ahead of Friday’s hearing before Judge John Middleton said Broad Peak and Tor held approximately $300m in unsecured notes issued by Virgin Australia.

In an effort to get a return on their investment of at least 69 cents in the dollar, the bondholders had been working with the administrators Deloitte, on an alternative deed of company arrangement (DOCA) to be put to creditors at their August 22 meeting.

According to the submission, Deloitte had told the bondholders it would provide feedback on all offers received for Virgin Australia so they could prepare “a better offer”.

However it was alleged Deloitte changed its tune two weeks later, informing the bondholders that no feedback would be provided on their proposal.

A few days later, they were told “for the first time” they would have to submit an unconditional proposal supported by the payment of $625m secured in favour of the administrators.

When their offer was lodged on June 24, the bondholders were told they would not be allowed to present their proposal to creditors because a deal had been signed with Bain.

Details of that transaction were kept confidential however, and last week Deloitte secured a Federal Court order to keep the deal under wraps.

“The bondholders have now twice requested disclosure of the deal, including on the day before the orders were made by the court,” said the submission.

“That notwithstanding, the administrators procured the court orders without apparently disclosing the foregoing communications and requests from the bondholders.”

Broad Peak and Tor are being represented by law firm Corrs Chambers Westgarth.

Virgin Australia went into voluntary administration on April 21 with debts of $6.8bn, including $2bn owed to bondholders.

On Wednesday Deloitte hit back at the bondholders’ demand for access to the sale agreement with Bain, saying the transaction signed with the private equity firm “was in the best interest of all creditors”.

“The expedited sale process, and now binding agreement with Bain Capital, provides transaction certainty so that liquidation can be avoided and a return to unsecured creditors is achieved,” a statement from Deloitte said.

Last week, Deloitte informed shareholders in the airline they would get nothing for their investment and warned creditors they were unlikely to be repaid in full.

Bondholders fear they will get as little as 6.5c in the dollar for their investment, which totalled almost $2bn.

Senior administrator Vaughan Strawbridge has said he will release details of the sale to Bain Capital in a report to creditors ahead of their next meeting in August.