Virgin Australia investors owed $2bn vow to present rival bid to buy airline
Bondholders owed $2bn by Virgin Australia have committed to putting a rival bid for the stricken airline to its creditors at a meeting next month.
During a federal court hearing on Friday morning, counsel for a group of the bondholders, Ian Jackman SC, raised concerns that a sale to US private equity group Bain Capital was being treated as a “fait accompli” by the airline’s administrators.
Judge John Middleton rejected a request by the bondholders for access to the sale agreement between the administrators and Bain Capital.
However, he warned the administrators that if they failed to disclose enough information to creditors to enable them to make an informed decision, they risked the creditors’ meeting becoming mired in litigation.
This could potentially derail any sale, putting at risk the future of Australia’s second-biggest airline, which employs about 10,000 people.
Related: Virgin Australia investors owed $2bn try to block sale to Bain Capital
“It is in everybody’s interests for as much communication [as possible] to alleviate people’s concerns,” Middleton said.
Jackman told the court the bondholders sought access to the sale agreement so that they could prepare a rival proposal, in the form of a deed of company arrangement, to be considered by the creditors.
“We need to know what the Bain transaction involves, how it’s structured … and we need to know what will be involved in unwinding the Bain agreement if our alternative Doca [deed of company arrangement] is approved by creditors,” he said.
He said the bondholders also wanted to be able to provide the sale documents to the takeovers panel for the purpose of a separate proceeding in which they have alleged the conduct of the administration amounts to unacceptable circumstances.
However, Middleton said the bondholders could come back to him and apply for the documents if the panel decided to hear the case.
Counsel for the administrators, Ruth Higgins SC, said the administrators had used their powers under the corporations law to sell Virgin Australia’s assets to Bain Capital.
However, Jackman said it appeared that the Bain deal was more complicated than a simple sale because it also involved putting a deed of company arrangement to the creditors’ meeting.
He said the administrators were proposing giving information about the deal to creditors only in a report delivered to them at “the 11th hour” before the meeting.
“There is a desire by our opponents to leave that until it is too late for us to use that information except to vote on the Doca put forward [by Bain],” he said.
Higgins said there was “no proper basis at the moment for any concern that insufficient information will be given”.
Virgin Australia collapsed into administration in late April after the Morrison government refused repeated pleas from chief executive Paul Scurrah for a bailout.
After a breakneck sales process administrators, led by Deloitte partner Vaughan Strawbridge, announced Bain as the successful bidder in late June.
The bondholders did not participate in the process but lodged a late proposal to pour an additional $1bn into the airline and re-list it on the stock exchange.
If they do not succeed with their rival Doca, they fear a return on their investment estimated to be less than 10c in the dollar.
