Bain Capital takes control of heavily indebted budget carrier Virgin AustraliaBusiness | 4 Sep 2020 4:02 pm
US private equity firm Bain Capital is the new owner of Virgin Australia, with the largest group of creditors voting in favor of the A$3.5 billion sale on Friday, ABC News reports.
Unions representing many of Virgin's 9,000 employees voted yes to the sale of Australia's second-biggest airline at a lengthy creditors meeting.
Virgin Australia has been one of the biggest corporate casualties of the coronavirus crisis, making a third of its workforce redundant.
It was one of the Asia-Pacific region's first airlines to fall when it was placed into voluntary administration on April 21, with debts of A$6.8 billion.
It collapsed after its biggest shareholders, including Richard Branson's Virgin Group, and the Federal Government declined to give additional funding to save the airline.
Bain Capital's plan is now seen as the company's fastest route to recovery.
The Boston-based firm has vowed to keep thousands of jobs, honour all employee entitlements and carry forward all travel credits and Velocity frequent flyer booked flights.
It has also said it will invest in regional services, although they will be likely cut down.
Virgin will no longer operate as a full-service carrier like Qantas, although the revamped airline will maintain key routes internationally.
When flights resume post-COVID, the airline will be operating a much smaller fleet of Boeing 737s.
Virgin Australia chief executive Paul Scurrah has said he expects to have between 30 and 60 Boeing 737s in the air by the middle of 2021, depending on demand.
Deloitte's lead administrator Vaughan Strawbridge said the sale was a significant milestone for both the future of Virgin Australia and Australia's aviation industry more broadly.
The deal will be signed within 15 business days and will then have to get Federal Court approval for the transfer of the shares in Virgin Australia to Bain Capital.
This is expected to be completed by October 31, and a creditors' trust will be created to consider claims and pay creditors.
The timing of the payment of the dividend to creditors is expected to happen within six to nine months.
Strawbridge said there was "still a lot of work to do" to complete the airline's restructure.
He acknowledged the airline's 3,000 employees who will lose their jobs and "the difficulties that this will cause them and their families".
He also noted the "numerous suppliers and investors who will not receive all of the monies owed to them".
Bain Capital managing director Mike Murphy said the firm could now start the "rebuilding process".
Bain's aim, he said, was to minimise disruption as they "build a stronger, more profitable and competitive Virgin Australia".
Virgin Australia said in a statement it would "continue to offer choice and convenience through an extensive network of domestic and short-haul international destinations".
This, it said, would include frequent capital city connections and services to leisure and regional markets as well as a network of lounges in key cities across Australia.
"Customers who continue to fly Virgin Australia are not likely to notice any differences moving forward."
Virgin has more than 10,000 creditors, the bulk of whom are its 9,000 employees, but which also include bondholders and aircraft lessors.
Bain's offer includes the payment of all A$450 million in worker entitlements and all A$2.3 billion of debt Virgin owes to secured creditors.