Virgin Australia sale: Virgin heading for shortlist of 3 after 8 indicative bids

Virgin administrators expect to receive eight non-binding bids for the airline by close of business, with plans for a shortlist of three by early next week.

Virgin staff Phil Vlieg, Captain Anthony Saville, Peter Armstrong and Alahna Wilkinson posing in front of Long Beach, 737-800 at Brisbane. Picture: AAP

The administrator of Virgin Australia is expecting to receive eight non-binding indicative bids for the airline by close of business Friday with plans to cut this down to a short list of three by early next week.

Virgin Australian administrator Vaughan Strawbridge, from accounting firm Deloitte, told The Australian on Friday that he expected to receive eight bids, which he described as a “really strong outcome”.

Three of the leading bidders are believed to include a consortium involving the $170 billion Australian Super and the Ben Gray-backed private equity firm BGH, Canadian infrastructure investor Brookfield, and private equity firm Bain.

A fourth player is Indian investor InterGlobe Enterprises (IGE), which is led by Indian billionaire Rahul Bhatia who co-founded Indian budget carrier IndiGo, which confirmed to The Australian today it would be lodging a bid.

While the Queensland Government this week announced plans to contribute a possible $200 million to a bid for Virgin, it was not a bidding in the current process, preferring to wait to talk to the short listed bidders which will be confirmed next week.

Virgin was placed into voluntary administration on April 20 with debts of some $7 billion.

Mr Strawbridge said today that the next step would be to work with the eight bidders to produce a short list of three which would be decided on by early next week.

“We will be working over the next three days with the bidders with a view to developing a short list so we can take a smaller number through to the next stage,” he said.

“We don’t want a lot of parties,” he said.

“We need the right parties who have done an intensive amount of work and have followed it up with their bids which we can work through over the next month.”

While Friday’s process involved the filing of “non-binding indicative” bids for Virgin, the administrator is working towards having binding offers lodged by June 12 with plans for a winning bidder to be announced by the end of June.

Singapore Government wealth fund Temasek, which is a 55 per cent investor in Virgin shareholder Singapore Airlines, is a funding partner of the consortium, but sources close to the Australian Super/BGC consortium denied on Thursday that it was a direct player in its bid.

Queensland stays hand

Queensland Investment Corporation chief executive, Damien Frawley, who has been asked to oversee the Queensland bid, told the Australian on Thursday that QIC would not be making a bid on Friday but would talking to short listed players from next week.

“We have elected not to commit to Friday’s process,” he told The Australian.

“We want to ascertain what happens after Friday and see who’s left in the ring.”

“Then we will continue our engagement with some of those consortium.”

Queensland has indicated it could put as much as $200 million into a bid for Virgin potentially through a range of options from equity to debt or other forms of assistance.

“We’re good for $200 million at least,” Mr Frawley said.

He said the government had “strategic objectives” for its bid including maintaining Virgin’s headquarters in Brisbane and making sure the state had access to two competitive airlines which were critical for it tourism industry.

But he said QIC would also be assessing its involvement in any bid on financial terms as well.

“This needs to be assessed on its merits financially,” he said.

He said QIC would not be recommending a bid to the government if it “didn’t stack up.”

Queensland Treasurer Cameron Dick said on Wednesday that the investment “could take the form of a direct equity stake, a loan, a guarantee or other financial incentives.”

ATO talks

Meanhile, The Australian Taxation Office is in discussions the administrators to determine to what extent they should be liable for any overpayments made to the airline’s employees under the federal government’s JobKeeper scheme.

In the Federal Court on Friday morning, the ATO asked for more time to discuss the issue with Virgin’s administrator Deloitte.

It also said it wanted to consider whether there should be any restrictions placed on the waiver of personal liabilities granted by the court to Deloitte for Virgin’s incurred debts during the administration process.

The court will now reconvene next Wednesday to debate or finalise these issues.

The administrators have asked the court to consider that their personal liability be limited where the airline needs to enter into new contracts required to maintain operations during the administration process.

Specifically they want to avoid personal liability for payments under the federal government’s coronavirus wage relief subsidy, JobKeeper.

More than 8,200 of Virgin Australia’s 10,000 employees have claimed a total of $24.8m in JobKeeper payments.

On Wednesday the commonwealth Attorney-General also sought to intervene in the proceedings in relation to JobKeeper payments to Virgin staff and the federal government’s Fair Entitlements Guarantee (FEG) scheme, which pays workers’ entitlements if their bankrupt employer cannot.

The administrators have estimated that the value of employee entitlements that would crystallise on the liquidation of the group is approximately $450m.