Virgin Australia customers, frequent flyer members could swing...

Virgin Australia customers, frequent flyer members could swing creditors' vote
By Patrick Hatch and Sarah Danckert

June 26, 2020
Virgin Australia's administrators Deloitte are hoping to seal a sale of the collapsed airline to US private equity giant Bain Capital and avoid liquidation by giving every customer owed flight refunds or frequent flyer points the chance to vote on its future.
Deloitte on Friday said it had signed a binding agreement for Bain to buy Virgin, after a rival bidder, Richard Branson-linked Cyrus Capital Partners, withdrew its rescue offer saying Deloitte had stopped returning its phone calls or replying to its emails.

An empty Virgin Australia check-in area at Brisbane domestic airport.CREDIT:AAP
Bain and Deloitte would not reveal the size of the winning bid, how many jobs will be lost from Virgin's 9000-strong workforce or how much will be paid to creditors owed $6.8 billion.
But in a statement Bain said it would protect "as many Virgin Australia jobs as possible", honour frequent flyer points and travel credits for cancelled bookings, and back Virgin's current management led by chief executive Paul Scurrah.

The deal will be put to a vote of Virgin's creditors in August, with bondholders, secured creditors and Virgin workers being the decisive voting blocs.
However, a well-placed source close to the sale process said Deloitte was also exploring options, including a technology platform, to let thousands of Virgin customers also vote on the deal, which needs the support of 50 per cent of creditors by both number and value.
Virgin has total debts of $6.8 billion and 12,000 registered creditors, including 9000 employees. The airline's tens of thousands of customers owed points or flight credits could secure the vote for Bain after it promised to honour what they are owed.
Deloitte declined to comment. However, joint administrator Vaughan Strawbridge did say that the creditors' vote would only influence the outcome of Virgin's legal entities, with the deal signed on Friday assuring Bain will buy Virgin's assets regardless.
"The benefit of this is creating certainty around employment, an outcome for creditors and also funding for the business," Mr Strawbridge said.

That structure could prevent any alternative offer - including from bidders already knocked out of the sale process - as well as from Virgin's unsecured bondholders, which proposed swapping their debt for ownership of the airline to avoiding having their $2 billion in debt virtually wiped out in a sale to Bain.
Sources close to the bondholder group, who asked not to be named because their dealings are confidential, said it was considering legal action given Deloitte's references to binding agreements, indicating that there was little room for a rival proposal.

The bondholders are concerned the sale agreement would contain a clause trying to block them from putting forward a competing proposal, they said. One insolvency expert, who declined to be named said: "a court would likely ignore that as contrary to public policy".
Mr Strawbridge would not confirm whether the bondholders proposal could be considered, but said the group "came in very late which made it very difficult for them to do much due diligence".
A spokesman for the bondholder group said it was disappointed the administrators did not give due consideration to its $925 million recapitalisation proposal, which it believed was the best outcome for workers and other creditors.
Australian Council of Trade Unions president Michele O'Neil said the sale was signed "in the best possible terms given the circumstances" while the global aviation industry remained on its knees.
Ms O'Neil said she looked forward to meeting Bain for "urgent discussions on their plans and the issues of concerns to workers: in particular their jobs, the ramp-up of work and flights, and their future within a rebuilt and viable Virgin Australia".