Knocked-out bidders BGH Capital and AustralianSuper were proposing to inject between $800m and $900m of working capital into Virgin Australia straight after gaining ownership, if their consortium had been successful in its pursuit of the airline.
DataRoom can also reveal that Indigo Partners, based in the US, which was also a party competing, had put forward an even more lucrative deal to that proposed by BGH.
Indigo Partners’ proposal would have seen the Virgin Australia unsecured bond holders paid back some money while also looking after employees.
It comes after New York-based hedge fund Cyrus Capital Partners and Bain Capital emerged on Tuesday as the final bidders chosen by the airline’s administrator, Deloitte.
It is understood that the BGH Capital/AustralianSuper bid would have added up to more than $4bn, with employees to have been given priority over bondholders, owed $2bn.
The bond holders would have had their investments wiped out under the BGH Capital plan.
BGH Capital and AustralianSuper, along with Indigo Partners with Oaktree Capital Management, are now out of the contest to buy Virgin Australia, which collapsed into voluntary administration with debts worth $6.8bn.
With Bain Capital and Cyrus Capital Partners now through to the last round, final bids were initially due late next week, but the timeline has now been extended.
It is understood that Cyrus Capital Partners, headed by American hedge fund identity Stephen Freidheim, was making efforts on Tuesday night to find an investment banking adviser for its pursuit of Virgin Australia. Its success so far in the contest has taken many by surprise.
Bain Capital, which has former Jetstar boss Jayne Hrlidcka in its camp, has been working with Goldman Sachs and Korda Mentha, and the thinking among most is that the Virgin Australia competition is now Bain’s to lose.
A successful turnaround of Virgin Australia will offer an opportunity for Bain Capital to stamp its mark on the Australian private equity scene, where it already owns Boost Juice owner Retail Zoo, and child care businesses Camp Australia and Only About Children.
It is understood that aside from Bain, BGH and Australian Super saw the greatest threat in the contest coming from US-based airline investor Indigo Partners, with Oaktree Capital management. But that consortium was also knocked out of the contest on Tuesday.
Some close to the process say in the case of Virgin, it is hard to look at the value of a bid by way of a number, given some could offer a lower price but reinstate more employees.
Sources close to the final two bidders suggest their offers could be worth between $3bn and $4bn.
It is understood that BGH Capital was not planning to refinance the debt and would offer up the $800m to $900m of working capital from its own equity straight away, amid fears Virgin Australia was running out of cash and may face liquidation.
Sources say BGH Capital was planning to take on a large number of the existing airline leases for Boeing aircraft from the onset, but wanted to recut the lease agreements.
Virgin Australia had about 80 aircraft, all of which were leased and the lessors owed $1.88bn.
The challenge for voluntary administrator Deloitte and restructuring firm Houlihan Lokey is that they were pulled in at a late stage to rescue Virgin, which some believe was caught out by COVID-19.
The coronavirus crisis required company boards and management to get on the front foot from the onset.
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