Deloitte confident Virgin will keep flying

Virgin Australia’s administrators Deloitte is confident of attracting a buyer for the debt-laden airline but won’t revealing the identity of any potential suitors.

At least 20 parties have expressed interest in the sale of Australia’s second carrier, which slid into voluntary administration last week.

Deloitte revealed eight prospective buyers have signed non-disclosure agreements so far, at its first meeting with Virgin creditors on Thursday.

Negotiations are ongoing with another 12.

Vaughan Strawbridge, of Deloitte, said he had been encouraged by the calibre of applicants.

“It’s still early days, yet I’ve been encouraged by the level of sophisticated party interest in the sale,” he told creditors.

After outlining the administration process, Mr Strawbridge reiterated his intention to keep Virgin in the skies.

“We remain strongly focused on restructuring and refinancing the business…bringing Virgin out of external administration as soon as possible in an outcome that will retain jobs and the airline’s contribution to Australia and its economy,” he said.

He maintains a sale by the end of June is achievable.

But Deloitte will be making a Federal Court application to extend the convening period – before the second creditors meeting – until August 22. 

A 69-member creditor committee was appointed on Thursday to represent their interests.

Around 1300 people joined the call and question and answer session, which was held remotely due to coronavirus health measures.

Mr Strawbridge lay blame for Virgin’s recent struggles on the pandemic.

“This could not have come at a worse time for Virgin Australia,” he said.

Management had already put in place a transformation program to enhance the airline’s profitability and begun negotiations over debt.

But the roll-out was scuttled by the outbreak of COVID-19.

With flights grounded, the business did not have the available cash resources to ride out the crisis.

It is estimated nearly $7 billion is owed to Virgin’s more than 12,000 creditors.

Deloitte have begun their own restructuring process of the company, which will proceed much faster.

“Voluntary administration provides a process where that can be accelerated in a way that it couldn’t before,” Mr Strawbridge said.

He also confirmed employees stood down would continue to accrue entitlements and access the federal government’s JobKeeper payments.

Parties believed to have already expressed interest in the beleaguered airline include Melbourne-based BHG Capital and US private equity firms Apollo Global Management and Oaktree Capital Management.

Deloitte have retained Houlihan Lokey and appointed Morgan Stanley to advise them on restructuring the company.

About 9000 staff work directly for Virgin Australia with up to 15,000 jobs at risk should a decision be made to carve off assets to service the airline’s debt.

The federal government has repeatedly rejected Labor-backed calls to buy a stake in the beleaguered airline, with senior ministers instead pressuring Virgin’s major shareholders to step in.

The company is 90 per cent foreign owned with Singapore Airlines, Etihad Airways and Chinese conglomerates HNA Group and Hanshan owning 80 per cent between them while Richard Branson’s Virgin Group still owns 10 per cent.

The airline is currently piloting a skeleton 64 return domestic flights a week while assisting in international freight runs and federal government-supported evacuation of Australians in Hong Kong and Los Angeles.

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