Virgin Australia's administrator Deloitte says it has agreed to sell the bankrupt airline to American private equity giant Bain Capital, after rival bidder Cyrus Capital Partners withdrew its rescue offer.
Cyrus - which was a founding investor alongside Richard Branson in Virgin America - said on Friday morning that it was pulling out of the sale "due to lack of engagement" by Deloitte.
Virgin Australia went into voluntary administration in April with debts of $6.8 billion. Credit:AAP
Deloitte said in a following statement that it had entered into a sale and implementation deed with Bain which - subject to approvals including a vote of creditors in August - will result in the sale and recapitalisation of Virgin.
"Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia’s second airline, thousands of employees and their families and ensure Australia continues to enjoy the benefits of a competitive aviation sector," joint administrator Vaughan Strawbridge said in a statement.
The New York-headquartered Cyrus said that after submitting a bidding offer for Virgin on Monday as one of two short-listed bidders, "administrators have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer".
Cyrus said in a statement that as a result, it withdrew its offer on Friday morning.
"I am disappointed that it has become necessary to withdraw our offer," said Cyrus's founder and chief investment officer, Stephen Freidheim.
"Cyrus firmly believes that the Australian aviation industry has a bright future and would be willing to reinstate our offer if the administrators agree to re-engage in good faith, productive discussions."
Deloitte has been contacted for comment.
Virgin went into voluntary administration in April with debts of $6.8 billion, setting off a months-long sale process. Deloitte was set to name a preferred bidder out of Bain and Cyrus on Tuesday and then put that to a vote of creditors in mid-August.
The sale could also still be upended by a late intervention from Virgin’s unsecured bondholders who have presented a proposal to take control and recapitalise the airline.
Cyrus dropping out of the race will come as a blow to some of the unions representing Virgin’s 9000-strong workforce who favoured the group over Bain.
An insolvency expect with knowledge of the deal said it was "highly unusual" for an administrator to stop taking calls or responding to emails to one of the parties in a two-horse race.
"It tells me that they always wanted Bain," they said.
They said the bondholders could not be ruled out given their offer to recapitalise the airline and pump in $1 billion in new cash would have to be considered at an upcoming meeting of creditors to vote on which offer they prefer.
At that meeting, Deloitte will have to measure Bain's offer with that from the bondholders to consider the rights of all creditors. Sources close to the dealings say the Bain offer has little in the way of a payout for bondholders who are owed $2 billion.
More to come
Business reporter at The Age and Sydney Morning Herald.
Sarah Danckert is a business reporter.
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2020-06-26 01:29:50Z
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