Creditors of Virgin Australia have voted to accept the sale of the stricken airline to US private equity group Bain Capital, ending a high-stakes process that began in April when the company fell into administration after the federal government refused to bail it out.
Virgin Australia’s new owners now face the task of rebuilding the airline in an aviation industry shattered by border closures and against the backdrop of a deep economic recession, while facing stiff competition from an aggressive bigger rival, Qantas.
Unions supported the Bain bid, even though it will result in the loss of 3,000 jobs, after the private equity group promised to run a bigger airline than rival bidders and maintain international operations.
British billionaire Richard Branson, whose Virgin Group owns the Virgin brand, also supported the Bain bid.
Bondholders owed about $2bn do worst out of the deal – they stand to receive less than 10c in the dollar. Trade creditors do a little better, recovering about 13c, and will also benefit from the continued existence of a major customer.
Shareholders, including Chinese state-owned travel group HNA, Singapore Airlines and the Emirati-backed Etihad Airways, are likely to be completely wiped out.
Transport Workers Union national secretary Michael Kaine said there was “a long road ahead to ensure Virgin’s success and we will hold Bain Capital to account on its promises”.
“We will do this through our usual channels but also through the union advisory council that Bain has agreed to set up so workers’ voices on governance can be heard,” he said.
Branson said his group looked “forward to working with Bain to revive and rebuild Virgin Australia into one of country’s leading companies once again”.
“The successful vote at the creditors’ meeting is a significant moment for the airline as it can now plan for the future and start work on getting back into the air and providing much needed competition for Australian travellers.”
Mike Murphy, a managing director at Bain, said the group “can now continue the rebuilding process from the strongest possible platform and with the least disruption”.
“We are working closely with Virgin management to build a stronger, more profitable and competitive Virgin Australia, and we look forward to the future with confidence,” he said.
The bondholders had put forward an alternative proposal under which the airline would have been recapitalised and its shares returned to trade on the stock exchange.
However, before the meeting, Virgin Australia’s administrators, partners at accounting firm Deloitte, had warned creditors that they would use their powers to sell the airline’s assets to Bain even if the deal on offer was voted down at the meeting.
The administrators told creditors they would get a better result if they voted for the Bain offer.
The lead administrator, Vaughan Strawbridge, said the administration and sale process was “challenging”.
“This outcome provides certainty for employees and customers, a return to creditors, opportunities for suppliers and financiers to continue to trade with the Virgin Australia Group as well as maintaining a competitive Australian aviation industry for the benefit of consumers,” he said.
