Virgin Australia’s bondholders ‘expected to put forward revised offer’

The second creditors meeting will be held on August 22 for employees, bondholders and others owed money by Virgin Australia. Picture: Annette Dew

Virgin Australia’s bondholders are expected to put forward a revised offer at the creditors meeting next month that will offer deeper insight into the funding behind its proposal to buy the airline.

Bondholders, owed about $2bn, fear they could lose much of their investments under preferred bidder Bain Capital and have been exploring legal avenues to derail the proposal from the Boston-based private equity firm.

One source said that the bondholders, represented by Faraday Associates, plan to offer more detail about where committed funding for their proposed deal is coming from.

Some believe they are searching for additional funding.

An earlier proposal by bondholders attracted criticism for not being actionable.

Bondholders had said that their recapitalisation plan was underwritten by existing bondholder representatives Broad Peak Investment Management, which manages funds for Singapore’s Temasek, and Tor Investment Management.

The second creditors meeting will be held on August 22 for employees, bondholders and others owed money by Virgin Australia to vote on whether to complete a sale to Bain Capital through a deed of company arrangement.

The Australian earlier reported that administrators have all but ruled out a deal with any party except Bain Capital.

Bain Capital or Virgin Australia’s voluntary administrator Deloitte are yet to offer any clarity as to how many cents in the dollar bondholders will be paid.

Deloitte has defended its handling of the case, saying the tight time frame of the sales process was designed to prevent the airline entering liquidation, said to be a significant risk.

Voluntary administrator Vaughan Strawbridge had earlier said the alternative was a traditional asset sale that would be costly and take significantly longer.

An alternative proposal, such as that being prepared by bondholders, will only be put to creditors if the administrators determine it represents a better deal for all concerned.

Strawbridge said that the offer previously put forward by the bondholders was not taken forward due to its conditional nature, lack of committed funding or certainty of an outcome.

Virgin Australia went into voluntary administration on April 21 with debts of $6.8bn owed to more than 10,000 creditors, including $2bn to bondholders.

Under the bondholders’ earlier proposal, Virgin Australia would provide $125m upfront to Deloitte to fund the rest of the administration process, and a further $800m. That deal implied a return of about 70c in the dollar for bondholders.