Virgin creditors not expected to be repaid in full: Deloitte

Virgin Australia’s creditors have been told not to expect to be repaid in full, following the sale agreement with Bain Capital.

Virgin Australia aircraft parked on the tarmac at Brisbane Airport. Picture: AFP

Virgin Australia’s creditors have been told they should not expect to be repaid in full, following the sale agreement struck between the administrator and US private equity firm Bain Capital.

A declaration to the ASX signed by Deloitte’s Richard Hughes said there was no chance shareholders of the airline would receive any distribution for their shares.

The carrier went into administration on April 21 with debts of $6.8bn owed to more than 15,000 creditors including employees, bondholders, lessors, landlords and suppliers.

Mr Hughes said depending on their individual tax circumstances, shareholders could rely on the declaration to claim capital losses in the income year in respect of their 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 is expected to re-emerge from administration as a leaner, single aircraft type airline focused on a tight domestic network.

Although the deal involves a significant upfront capital injection by Bain to keep Virgin Australia operating, the sale will not be confirmed until a creditors meeting on August 22.

The major threat to the sale proceeding would appear to be from bondholders, who are owed more than $2bn and include 6000 mum and dad investors and over 30 global institutions.