KordaMentha in the mix for Virgin Australia tussle

DO NOT USE, EMBARGO, HOLD COURIER MAIL FUTURE TOURISM CAMPAIGN A Virgin Australia plane at the International Terminal of Brisbane Airport on Friday, August 30, 2019. (AAP Image/Claudia Baxter)

Insolvency firm KordaMentha is believed to be considering a move to represent Virgin Australia bond holders, who are owed about $2bn, with the chances of it ousting Deloitte as voluntary administrator of the failed airline fading.

Ahead of the Virgin Australia creditors meeting on Thursday, it is understood that the Melbourne-based firm has been angling for the voluntary administrator role for the airline, with the hope that it would curry support from creditors to force Deloitte to step aside.

However, those close to the situation believe Deloitte’s chances of remaining as the administrator are strong.

Apart from KordaMentha, rival McGrathNicol is thought to be in line for a possible role.

PwC is working for the Virgin Australia frequent-flyer program Velocity, while Houlihan Lokey is working on the restructure of Virgin Australia, which has previously counted Morgan Stanley and UBS as advisers.

The bond holders include Australian retail investors, who subscribed to a recent offering to help the airline buy out its joint venture partner in Velocity.

However, all the bond holders risk coming away from a recapitalisation of the airline empty-handed, given they rank behind secured lenders.

If KordaMentha takes on the job for the group, it would be in somewhat of an activist role where it hustles to secure more funds for the group of creditors.

But some sources say KordaMentha is seen as close to the unions, which may count against it when it comes to an appointment.

Law firm Corrs Chambers Westgarth is already working for some of the bond holders in the group.

While private equity funds, airlines and Australian-listed groups are said to have expressed interest in the carrier, market analysts are sceptical that any party will opt to rescue Virgin Australia in its current form.

Instead, they would reinvent the business as a low-cost carrier with a new name, to rival the Qantas-owned Jetstar service.

It is understood that the federal government is under pressure to ensure the airline survives to provide competition for Qantas and save jobs.

Among the parties said to be interested so far are Macquarie Capital and Wesfarmers.

Other early suitors are said to include Oaktree Capital Management, Apollo Global Management, Bain Capital, Brookfield and Indigo Partners.

Buyout funds such as Kohlberg Kravis Roberts, TPG Capital and Blackstone are also likely to at least look under the bonnet. Rex has also been named as a party with some interest.

However, the coming weeks are expected to involve a game of musical chairs, where numerous parties drop out once they see the level of capital investment needed for the airline and about three consortiums consolidate.

Virgin Australia has struggled to make money in the past and no doubt recently appointed boss Paul Scurrah will be keen to see the airline re-emerge in a more profitable form.