Private equity funds including Oaktree Capital Management, Cerberus Capital, BGH Capital and Bain Capital have all been in the Rex data room assessing an acquisition of the carrier, say sources.
However, the parties shaping up as the most likely acquirers are funds from Asia or one or two strategic buyers including Alliance Aviation, which already operates in Australia and is almost 20 per cent owned by Qantas.
Alliance Airlines operates as Australia’s major fly in, fly out air charter operator, founded in 2002 and now with a fleet of 40 aircraft.
It is understood non-binding indicative offers are due within a week in a sale process run by investment bank Houlihan Lokey.
Rex collapsed into administration last month and owes about $130m to Asian private equity fund PAG.
PAG had been prepared to step in and own the airline, was the initial understanding, but now a sale looks more likely, as the government throws its support behind Rex and guarantees customers their flights or airfares back while the airline remains in administration.
While overall debts by Rex owing are around $500m, a buyer would likely need to write out a cheque of about $300m.
Although major private equity funds were in the data room assessing Rex as an opportunity, it is expected such groups will find it too small.
At the other end of the spectrum, regional carriers in Australia would be too small to buy Rex as a whole.
They include Western Australia carrier Nexus Australia, Skytrans (which flies in Queensland), Link Airways, (which flies through Queensland), NSW and ACT, Sharp Airlines which operates in Victoria and Tasmania and Northern Territory Air Services.
Groups which considered an acquisition of Virgin Australia when it collapsed in 2020 included US private equity firms Indigo Partners, which has stakes in various airlines globally, and Cyrus Capital, which invests in airlines, as well as BGH, so it would make sense if they once again took a look.
Interest in buying Rex by the Bain Capital-owned Virgin is seen as low, and as reported before, it was in talks to take Rex’s 737s.
Lender PAG is understood to have no plans to appoint a receiver to Rex, which would provide it more control over the process, with its ongoing dealings with administrator EY said to be constructive.
Bidders have moved in to weigh up an acquisition of Rex after EY restructured the carrier, returning it to one focused solely on flying to regional destinations and not major capital cities.
Sources say the regional routes Rex operates are profitable, but its undoing came as it tried to compete with Qantas and Virgin by offering services out of capital cities and was unable to compete on price.
Westpac has loans worth $170m to the Rex-controlled Pel-Air, which provides the NSW and Victoria air ambulance services and is not in administration.
Rex also owns a 50 per cent interest in the National Jet Express business, providing services for fly-in, fly-out mining workers.
Working for PAG are Deloitte and Ashurst while law firm White & Case is helping EY with Rex.
For the six months to December, Rex made a $3.2m loss compared to a $16.5m loss in the previous corresponding period.
Boston private equity firm Bain Capital purchased the previously listed Virgin Australia out of voluntary administration in 2020 for $700m in equity and took on its $5.15bn of debt.
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