Heavyweights take their seats for Virgin rescue bid

Virgin Australia CEO Paul Scurrah poses after the announcement the airline has entered voluntary administration. Picture: AAP

Law firm Corrs Chambers Westgarth is understood to have landed a role working for some of the Virgin Australia bondholders, believed to be owed up to about $2bn.

It comes after Virgin Australia entered voluntary administration on Tuesday, in the hope it can be recapitalised and relaunched in a stronger financial position.

Working for Virgin Australia has been law firm Clayton Utz, restructuring firm Houlihan Lokey, investment banks UBS and Morgan Stanley, and Deloitte, which is now the administrator.

Law firm Clifford Chance is said to be helping some of the lenders, which have up to $3bn worth of debt secured against Virgin Australia’s aircraft.

Major providers of aircraft leases include groups such as conglomerate GE, based in the United States, and Macquarie Group.

Former Macquarie Group boss Nicholas Moore has been appointed to engage with Deloitte, Virgin’s administrator, on the government’s behalf. EY may also have a government role.

It comes as major American private equity funds start applying sharper focus to the airline, with private equity firms Oaktree and potentially Apollo or Anchorage Capital said to be circling, along with Australian firm BGH Capital.

It is understood BGH Capital was in Virgin’s data room as late as the weekend, but is believed to have stopped working on a plan for now on the back of the entry into administration, potentially now changing tack.

It is believed that an airline is working with a buyout fund to explore a recapitalisation that would possibly have government support.

A board meeting of international shareholders late on Monday signed off on the move to put the company into administration.

This is in the wake of coronavirus travel restrictions shutting down the airline and there being no prospect of a government bailout.

It is understood Virgin Australia has been planning for a possible administration for about two weeks, with Deloitte brought into the fold early on to assess matters ahead of the likely collapse.

A challenge is the structure of the debt and dispersed interests involved, say sources.

KPMG is believed to be Virgin’s auditors, which means it is unlikely to secure a role working with other parties on the airline’s restructure.

It is expected that an information memorandum will be sent out shortly for Virgin, with more than 10 parties expressing an interest in the airline already, according to Deloitte.

It is understood that some restructuring firms have been hesitant to commit to representing the bondholders on the back of fears that their $2bn of interest will be completely wiped out.

Some estimate that Virgin may be now worth about half the value of its $5bn-odd debt pile following the recapitalisation, although it was too early to tell what sort of proposals from parties eventuate for the carrier.