Cyrus Capital Partners may call on Macquarie for Virgin Australia bid

Like Cyrus, Bain is also funding a Virgin deal itself without assistance from banks. Picture: AAP

Cyrus Capital Partners could be calling on Macquarie Group to inject equity into its bid for Virgin Australia, say sources.

It is understood that Macquarie’s involvement has made the Cyrus offer stronger from a financial perspective, in what could turn out to be a closely fought contest with Bain Capital when final bids are due on Monday.

It is understood that former Virgin Australia shareholder Etihad` has been keen to partner with Cyrus, but does not have the funds to do so, while Richard Branson’s Virgin Group will also be involved with Cyrus if it succeeds.

But as the final bid deadline draws closer for the contest to buy Virgin Australia, it is Macquarie Group’s involvement with Cyrus Capital Partners that is gaining attention.

Cyrus, which is one of the final two bidders for the airline with Bain, is being advised by McGrath Nicol, but Macquarie Group’s involvement from an advisory perspective is understood to extend only to advice on aircraft leasing, with Macquarie’s Transportation Finance Group engaged.

This part of the business is not assisting with negotiations related to unions or employees.

Macquarie Group has a close relationship with Qantas through its investment bank, Macquarie Capital, and it will not want to do anything to put that relationship in jeopardy.

Yet with Cyrus signalling that it is open to working with a partner and is funding the deal itself, it is now believed that one possibility being left open is Macquarie offering some equity to Cyrus to fund the transaction.

Cyrus has only $US4bn under management, but is understood that it has the capacity to access more funds.

Like Cyrus, Bain is also funding a Virgin deal itself without assistance from banks, as first flagged by DataRoom, although it could bring in financiers at a later stage once Virgin is under its ownership.

It counts Goldman Sachs and KordaMentha among its advisers.

Experts say that the critical issue about the bids is how much of the liabilities the two suitors are willing to take on rather than the amount of equity paid to buy the business.

One view around the market is that equity — in addition to the debt — will be paid out only for the Velocity frequent flyer program.

Velocity could be worth as much as $1.5bn.

But the fact that funding is not being tapped by financiers adds further weight to the theory that the bond holders, owed about $2bn, will be left out in the cold.

It is understood that Bain’s equity funding is coming from global funds.

The situation is playing out after Virgin collapsed in April during the coronavirus crisis with $6.8bn of debts owing. A vote on a sale of the airline by creditors will occur in August.

Deloitte is working as the airline’s voluntary administrator.