Virgin Australia's administrators have entered into a sale agreement with Bain Capital, after its private equity rival Cyrus Capital Partners withdrew its offer this morning.Bain's private equity rival Cyrus Capital Partners withdrew its bid for Virgin Australia this morning, citing a lack of engagement from the airline's administrators.

Cyrus, along with Bain Capital, was one of two final bidders for Virgin, which went into administration in early April.

However, major bondholders, who stand to lose a large part of their $2 billion investment in Virgin as a result of its collapse, are preparing a last-minute buyout proposal to try and gazump the private equity bidders.

While they are not an official bidder, the group of bondholders wrote to Deloitte this week with an offer to inject $1 billion in cash.
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Bain Capital is the new owner of Virgin Australia, following this morning's shock withdrawal of challenger Cyrus Capital.In a statement issued this morning, administrator Deloitte confirmed it has "now entered into a Sale and Implementation Deed with Bain Capital which will result in the sale and recapitalisation of the businesses of (the Virgin Australia Group)."

Deloitte notes that "no return to shareholders is anticipated. At this stage, it is not possible to determine the estimated return to creditors however an update will be provided ahead of the second meeting of creditors."

Bain Capital says it is committed to protecting as many Virgin Australia jobs as possible, will "invest in and see closer integration of Virgin Australia and the Velocity program", and also honour all all existing travel credits.

Staff who remain with the airline will be offered the chance to be part of an "employee ownership / profit sharing scheme," while those who are let go will see their entitlements fully funded.
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Virgin Australia's takeover by a US private equity giant could be derailed as the airline's key bond holders lodge a case with the Australian Takeovers Panel, challenging the deal.
They will argue that the "circumstances regarding the process conducted by the administrators [Deloitte] are unacceptable and have the effect of precluding an alternative" deal being presented to Virgin's creditors at their next meeting in mid-August.

Key points:

• Singapore-backed Broad Peak and Hong Kong-based Tor are challenging the Virgin Australia sale to Bain Capital
• Both investment firms are owed money by Virgin Australia
• They claim the sale process precludes an attempt to put an alternative offer to other Virgin creditors

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Virgin Australia will shed about 3000 jobs and cull its low-cost subsidiary Tigerair Australia as it rebrands as a “value airline”, it announced this morning.

The job cuts affect about one third of the Brisbane-based airline’s workforce, across cabin crew, ground crew, engineers, baggage handlers and some international head office staff.

The company will also suspend all long-haul international flights, and will transition to a single Boeing 737 fleet for domestic and short-haul international travel.

Virgin Australia’s lounges will remain closed for the foreseeable future, due to a lack of demand during the COVID-19 pandemic.

Travel credits will be honoured until June 2023.

Key points:

• Plan for a stronger, more profitable and competitive Virgin Australia coming out of voluntary administration
• Focus on delivering exceptional experiences at great value with Virgin Australia’s core domestic and short-haul international business
• Virgin Australia to provide customers with the value of travel credits post administration with validity dates extended for bookings made prior to administration
• Resetting Virgin Australia to meet lower global and Australian demand, including:
• Reduction in cost base to meet sector uncertainty and COVID-19 market conditions
• Securing approximately 6,000 jobs when the market recovers with 3,000 roles impacted
• Simplified all-Boeing 737 mainline fleet and the retention of the regional and charter fleet, but removing ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft types.
• Long-haul international flying important part of plan but suspended until global travel market recovers
• Tigerair Australia brand discontinued with Air Operator Certificate (AOC) retained to provide option for ultra-low-cost operations when market recovers.
• Continued commitment to regional and charter flying.

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Virgin Australia has revealed plans to make about a third of its workforce redundant, with approximately 3,000 jobs expected to go under new owners Bain Capital, while 6,000 staff remain.

The private equity firm's plan for the airline sees the end of the Tiger Australia brand, although Virgin Australia said it would retain the air operator certificate so it could revive a low-cost carrier when the domestic holiday travel market fully recovered.

A key part of the plan is to operate an all Boeing 737 mainline fleet, with other aircraft types restricted to regional routes and charters.

This will mean removing ATRs, Boeing 777s, Airbus A330s and Tiger's Airbus A320s from the airline's fleet.

Virgin Australia chief executive Paul Scurrah said the airline had no choice but to shrink to survive amid the COVID-19 pandemic.
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Virgin Australia entered voluntary administration on April 21, weighed down by debts of $6.8 billion and facing a travel market gutted by the coronavirus pandemic. The flight path out of administration will also be long and bumpy, expects Virgin Australia CEO Paul Scurrah, who will remain to steer Virgin into this new era.

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“We have worked closely with Virgin management since the binding agreement was signed to develop this strategy together for a stronger, more profitable and competitive Virgin Australia," noted Bain Capital's local managing director Mike Murphy. "We reaffirm that we are backing Paul to successfully lead Virgin through the current turbulence and into the future.

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No mention has been made of how many of those jets will be in the hangars. Virgin owns some 40 Boeing 737s, all of which will likely remain on deck, while Bain could supplement that by cherry-picking the best deals from among the current roster of leasing companies who hold the keys to another 40 Boeing 737s.
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