Receivership unlikely for Rex as EY readies for sale

The likelihood is that a mixture of private credit funds, private equity and strategic groups consider buying Rex, in a similar way to when Virgin Australia collapsed. Picture: AFP

Rex’s private equity lender PAG is believed to be holding off on a move to appoint a receiver as administrator EY starts preparing documents for a sale of the regional airline.

Rex has drawn down about $120m of PAG’s $150m of debt and receivership would give PAG more control over the future outcome of the business.

Such a move would be preferable only if PAG was keen to buy the business back out of administration and did not want any other party to take it off its hands.

After initially being keen to take control, the understanding now is that PAG is open to the carrier being under the ownership of another group and would step in to take the reins as a last resort.

EY is understood to have been flooded with emails from interested parties, but there’s a question over how serious they are.

The likelihood is that a mixture of private credit funds, private equity and strategic groups consider buying Rex, in a similar way to when Virgin Australia collapsed.

This will mean groups like Oaktree Global Management and Cerberus Capital Management might reappear, along with Allegro Funds and Anchorage Capital Partners.

The majority of groups are thought to be tyre-kickers

Houlihan Lokey is poised to run the sale process for EY and documents are yet to be circulated.

Any interested suitor would likely need to think about a cheque of at least $300m.

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 owns a 50 per cent interest in the National Jet Express business, providing services for fly-in, fly-out mining workers, and that could be of interest to Virgin Australia in addition to Rex’s 737 aircraft. While Rex owns some of its aircraft, the fleet is about 30 years old on average.

Working for PAG are Deloitte and Ashurst while law firm White & Case is helping EY with Rex.

The government is understood to be committed to the survival of the regional carrier.