Virgin Australia creditors set to meet at the end of April

Virgin Australia went into administration this week owing creditors more than $5bn. Picture: AAP

Financial experts from top-tier accounting firm Deloitte, which on Tuesday was appointed as administrator of Virgin Australia, had their heads under the bonnet of the Richard Branson-founded airline’s operations many months before it officially collapsed.

Documents seen by Margin Call reveal that Deloitte, which in Australia is run by Richard Deutsche, was advising management on a potential sharemarket float of its lucrative Velocity Frequent Flyer business for nine months from February to November last year.

The firm also provided accounting advice to Virgin’s Velocity in the previous year.

Margin Call’s colleague John Durie flagged the potential conflict for Deloitte on Tuesday, and corporate undertaker Richard Hughes has now revealed the potential conflicts of interest in Deloitte’s “declaration of relevant relationships” ahead of the first meeting of Virgin creditors.

Deloitte does not believe the prior work for Paul Scurrah’s group presents any conflict of interest to the firm’s new role as Virgin’s corporate undertaker, however, creditors must approve the high-profile accounting firm’s appointment at the first meeting of creditors on April 30.

Thanks to social distancing, creditors will have to meet with the new administrators virtually rather than in person as is more normal practice.

It might not be as straight forward a gathering as Hughes and his colleagues might like.

But historic key strategic advisory work aside, Deloitte was first called into the Elizabeth Bryan-chaired Virgin by its corporate lawyers Clayton Utz more than a fortnight before the airline was tipped into administration.

Deloitte was first contacted on Sunday April 5 and then called into its first meeting with Virgin management on April 6, which then continued to be held daily, with corporate advisers from Houlihan Lokey and Virgin’s Clutz lawyers also in attendance.

So by the time this week rolled around and Deloitte was officially appointed as administrator, everyone knew each other well.

The Deloitte accountants were at the start of April charged with three tasks:

look at the airline’s finances with a focus on liquidity, including cash flow forecasts and form a contingency plan; to review stakeholder contracts to see what would happen “in the event of the failure of Virgin”; and to consider alternative plans if management’s turnaround couldn’t be achieved.

Clearly the third became the most relevant, with Deloitte’s Vaughan Strawbridge then attending Virgin board meetings held last Sunday and Monday, where he was asked “to clarify and explain to the directors the nature and consequences of an insolvency appointment”.

Then all that was left was the official paperwork.

With that paperwork done and the administration officially announced, the first meeting of individuals and companies owed money by Virgin will meet at the end of this month to lay claim to the millions they’re owed.

A total of 38 companies associated with the group were on Tuesday officially placed into the hands of voluntary administrators from accounting firm Deloitte, with the corporate undertakers set to meet with creditors for the first time on April 30.

However, due to the health risks associated with the global coronavirus pandemic, creditors are being asked to join their first meeting virtually, rather than in person which would occur under more normal circumstances.

Creditors who believe that are entitled to attend the virtual meeting are being asked to register with Deloitte by April 28.