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Virgin Australia: no ‘A’ but Shortlisted B & C – Bain Capital & Cyrus Capital Partners

Virgin Australia: no ‘A’ but Shortlisted B & C – Bain Capital & Cyrus Capital Partners

Updated:

Looks like late entry Brookfield didn’t get a guernsey.

Virgin Australia through its administrator Vaughan Strawbridge has made an announcement about the shortlisted candidates to take over the airline.

The Deloitte administrators have taken the weekend plus the past two days assessing the 5 non-binding indicative proposals they received on Friday, including the ‘outside‘ entry from Brookfieds.

. . . and the finalists are:

The two selected – a la reality show – to the next round are Bain Capital and Cyrus Capital Partners.

Bain Capital

Bain Capital’s spokesmen and ex-Olympic 4th place diver, Mike Murphy is quoted as saying:

“We want to bring back the best parts of the Virgin Blue culture,”

AFR

Which is being interpreted as code for ‘we want to take Virgin Australia back to being a profitable low-cost airline.’ Not sure what that means for international operations and domestic lounges.

Cyrus Capital Management

This outfit have a history with Virgin America as a cornerstone investor way back in 2004. The airline no longer exists as it was bought by Alaska Airlines in 2016 in a US$2.6 billion dollar deal.

The AFR is reporting that Cyrus’s pitch to unions last week had broad similarities to the current Virgin Australia’s management relaunch plan that they have been presenting to bidders. If other aspects of the bid also reflect the current executive teams plans, then we should see Virgin Australia remain as a full, or near-full service airline, with business class, and airport lounges, and probably an international arm, although maybe delayed.

Next Steps

The Administrators are sticking to the already outlined timetable.

‘The next stage in this sale process begins today.

Over the weekend through to today, we assessed the proposals received from shortlisted bidders and discussed their proposals with them to ensure a thorough and comprehensive assessment has been undertaken. Five non-binding indicative proposals were received on Friday, and they have now been further short-listed to two preferred bidders.

Both Bain Capital and Cyrus Capital Partners are well-funded, have deep aviation experience, and they see real value in the business and its future.’

Vaughan Strawbridge, Joint Administrator and Deloitte Restructuring Services partner

The statement goes on to thank all the interested parties, and their commitment to the process over the last few weeks.

The administrators intend to work with these 2 preferred bidders intensively leading to the lodgement of final binding offers by 12 June. It’s then off to a completed binding agreement by 30 June.

The Administrators expect the two finalists will engage with stakeholders including creditors, staff and the management team of the existing Virgin Australia

Virgin Australia Lounge, Sydney

2PAXfly Takeout

Well, as I have said before, there is still plenty of opportunities for this aircraft to go off the runway; one or both parties might get cold feet, or find something unacceptible in the discovery process, or, the administrators will run out of operating budget, and neither bidder will be prepared to stump up the requisite interim cash.

However, these bidders have fought pretty hard publicly, and apparently behind the scenes, so we can only hope that Vaughan is right, and they have created the requisite ‘competitive tension’ he was seeking.

Vaughan is sounding fairly pleased with himself:

‘The strong interest coming from all parties has generated the competitive tension we have sought that is
important in a process such as this, and we are in a strong place when it comes to delivering the best possibl
commercial outcome for all creditors, and to see a strong and sustainable Virgin Australia emerge from this
process. ‘

Vaughan Strawbridge, Joint Administrator and Deloitte Restructuring Services partner

It is expected that the other unsuccessful bidders in the process and their allies will sniff around the now shortlisted entities to try and get in on the action.

Best of luck to both B and C.

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