Virgin bondholders push to force Deloitte to reveal Bain deal details

Virgin’s administrators have slammed a court application by bondholders who want to know details of the sale to Bain.

Virgin Australia planes parked at Sydney Airport. Picture: Cameron Spencer/Getty Images

Virgin Australia’s administrators have slammed a court application by bondholders who want to know how much they can expect to get back from prospective new owners Bain Capital.

The airline went into administration on April 21 with debts of $6.8bn owed to more than 10,000 creditors including bondholders who were left almost $2bn out of pocket.

Singapore’s Broad Peak Investment Advisers and Hong Kong’s Tor Investment Management filed the application in the Federal Court on Wednesday, to gain access to confidential details of the deal struck with Bain.

Federal Court judge John MiddleSton ruled last Friday in favour of a submission by Deloitte’s Vaughan Strawbridge, that sought to keep the sale contract signed with Bain under wraps.

In a judgment that suggested the deal was far from watertight, Justice Middleton said he accepted that public disclosure of the material could result in the relevant transactions being prejudiced.

“That includes a risk that, due to the complexity of the transaction and the significant number of steps and conditions precedent that must be satisfied, unauthorised disclosure of some or all of the terms of the transaction may lead to misapprehension or confusion on the part of creditors or other stakeholders as to the implications of the transaction,” said the ruling.

“In my view, the commercial sensitivity supports the making of such confidentiality orders as sought, especially where the commercial sensitivities concern the future operation of the activities of the Virgin companies.”

The bondholders’ application to the court sought to give them access to the confidential material as well as the federal government’s Takeovers Panel. Broad Peak and Tor appealed to the panel on Monday, seeking a challenge to Mr Strawbridge’s decision rejecting their own proposal to recapitalise Virgin.

The proposal included $125m of upfront finance and an $800m capital injection as part of a deal that would have negated the need for a sale of the airline, by converting their debt to equity.

The Takeovers Panel is yet to decide whether it will review the decision.

But a statement from Deloitte on Wednesday said the two firms taking the court action did not represent the majority of bondholders.

“The administrators’ actions are in the best interest of all creditors, and have avoided the airline going into liquidation,” they said.

“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.”

The statement said the proposal made by bondholders in the final days of the sale process could not be taken forward as it was “highly conditional and without evidence of committed funding.”

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.

Mr Strawbridge has said he will release details of the sale to Bain Capital in a report to creditors ahead of their next meeting on August 22.

But the bondholders indicated that would give them little time to manoeuvre ahead of the meeting.

The application for access to Deloitte’s transaction with Bain Capital will be heard by the Federal Court on Friday.