The final stage of the Virgin Australia sales process is fast approaching, but there is a view that once a preferred bidder is selected, it could be some time before a transaction occurs.
Voluntary administrator Deloitte, along with advisers Houlihan Lokey and Morgan Stanley, will narrow the competition from four parties to two from Friday, when the shortlist of contenders in the contest are asked to submit further details on their recapitalisation proposals for the carrier that collapsed last month while COVID-19 travel restrictions were in force.
Indigo Partners, BGH Capital, Bain Capital and Cyrus Capital Partners are on the shortlist and which groups have made it through to the next stage will be known by Monday.
Final bids are then due about June 12 with the hope of wrapping up the contest by the end of next month.
However, some believe that the way the competition plays out is that at some stage next month, one group will enter exclusivity and then could potentially take some time before it finalises a proposal.
This is if at least one of the shortlisted bidders puts forward an offer that the administrator finds satisfactory.
For bidders, trying to wrap their heads around a complex operation such as Virgin Australia is not straightforward.
The view of those keenly observing the process is that the administrators will be pulling off what would almost be a miraculous feat to get a deal completely sewn up within close to four weeks.
It has taken months and in some cases years to reach an outcome for other airlines overseas that have collapsed.
Italian carrier Alitalia went into administration in 2017, and recapitalisation proposals were said to be due in October last year, with US-based Indigo Partners at some stage said to have been around the hoop.
However, the airline has this year been nationalised by the Italian government.
Former Australian airline Ansett collapsed in 2001 and was placed in liquidation the following year.
US-based Delta Airlines filed for bankruptcy in 2005 and re-emerged from bankruptcy in 2007.
Latin America’s largest airline, LATAM, filed for chapter 11 bankruptcy this week, while Virgin Atlantic is also in the middle of a restructure, so it will be interesting to follow how those sales processes play out.
The challenge for Deloitte is that time is running out for Virgin Australia, which has $100m of funds left that will keep it in the air until the end of June.
The longer the sales process takes, the more costly it will be.
One option to stave off a liquidation is for a party that enters preferred bidder status to offer a loan to the airline so that it can remain afloat until at least the creditors vote in August.
Matters such as negotiations with unions can be resolved and more consideration can be given to matters such as government subsidies.
Add your comment to this story
‘Uncertain future’ for Are Media magazines portfolio
Media industry experts are warning that Are Media’s stable of magazines faces the prospect of collapse or closure if a buyer cannot be found.
Backdoor listing plans weighed for Cromwell ahead of Brookfield play
The North American private equity firm has purchased a 19.9 per cent stake in the Brisbane-based real estate group after parties considered selling assets into the business.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout