Major airport sends distress flare to insolvency expert as COVID-19 bites

Sydney Airport and McGrath Nicol did not comment, while Melbourne Airport did not return a call to DataRoom. Picture: iStock

At least one of Australia’s largest airports is believed to be calling in the insolvency experts to guide it through the turbulent COVID-19 conditions, with one of the most high-profile names in the industry, McGrath Nicol, said to be involved.

Sources say McGrath has a role working for either Sydney Airport, which is listed, or the Melbourne Airport.

Both airports are well capitalised, and it is thought that the role does not involve any sort of potential insolvency but rather one offering assistance in negotiating with lenders.

This is as the return of large air traffic volume looks increasingly slim in the short term with a second major COVID-19 community outbreak in Victoria and also signs of the virus in southwest Sydney.

McGrath Nicol is also likely to be offering advice on how to handle the collapse of Virgin Australia, which is soon to be bought by private equity firm Bain Capital. At least one of the airports is an unsecured creditor.

The Virgin Australia deal is being closely watched, with much of Bain’s current business plan said to be based on the assumption of a recovery from the coronavirus outbreak and as bondholders owed about $2bn are threatening to derail the proposal.

Melbourne Airport is owned by AMP Capital, IFM, Deutsche, The Future Fund and Morrison & Co.

Sydney Airport is listed with a market value worth $12.09bn and is on the radar of fund managers for a potential capital raising.

However, in April, it said it had no need to tap the market.

Sydney Airport said at the time that it had secured an additional $850m of bank debt to further strengthen its balance sheet and shelved plans to pay an interim dividend.

At the time, the company said it had $430m of available cash, $1.75bn of undrawn bank debt and about $600m from the US bond market, offering combined liquidity of $2.8bn.

It had $1.3bn of debt due in the next 12 months and up to $200m of capital spending required over a year.