Virgin Australia: Bondholders last-ditch proposal

The Administrators for Virgin Australia, Deloitte have reportedly received, very early this morning, a proposal from the AU$2 billion worth of bondholders. It’s a bold plan that would give them an equity stake and about 70¢ in the dollar. The re-capitalisation project would cancel the sale process, continue Virgin Australia’s ASX listing and put AU$1 billion in a pile available to the airline.

I hope the administrators from Deloitte weren’t hoping this process would give them an easy life!

With the binding bids arriving on Monday, the administrators have been grilling the two prospective purchasers, Cyrus and Bain with a view to formulating a recommendation for the creditors. Now they will have to carefully review this new proposal, and doubtless, incur additional fees from banking and legal advisors.

The bondholders may have a good argument:

The bondholders argue that by converting into listed shares with a fresh balance sheet and a diverse shareholder base, Virgin Australia could be “battle ready” to deal with a second COVID wave should one arise, according to the proposal.

Australian Financial Review (AFR)

The AFR has been providing rigorous reporting on this issue, so if you have access, the article is well worth reading.

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

Just when you think its safe to go back in the water, a new bondholder shark appears!

Looks like the Deloitte administrators will be earning their fees, and burning the midnight oil before this process is over.