Virgin Australia’s USD2.5 billion takeover leaves little left for creditors
Unsecured creditors of Virgin Australia will lose the vast majority of money owed as it was revealed Bain Capital’s takeover of the airline will cost A$3.5 billion ($2.5 billion).
Priority creditors and employees will be repaid in full, but long term investors such as Etihad Airways, will get nothing, a report by administrator Deloitte said.
Creditors are due to vote on Bain’s takeover proposal next week.
The unsecured creditors are owed about $2.3 billion and will receive between 9% and 13% of money owed.
The purchase price includes payments to Virgin Australia employees, travel credits for customers whose flights were cancelled and taking on some of the carrier’s debt, Deloitte said.
Travel credits can be used for rebookings made up to 31 July 2022 for travel until 30 June 2023.
The Bain deal ‘provides for the best return to creditors in what are extraordinary circumstances, and that were impossible to foresee,’ Deloitte administrator Vaughan Strawbridge said.
Virgin Australia went into administration in April with debts of A$6.84 billion.
Bain has said it needs to cut the Virgin workforce of 9,000 by about one-third.
The report was critical of Virgin’s past business performance and misguided strategy.
The past decade ‘encompassed a change in the Virgin Group’s business from a budget to full-service airline. As evident by the year-on-year losses, the Virgin Group was unable to derive sustainable profits from this change in strategy’ the report said.
Written by Ray Montgomery, Asia Pacific editor
TravelMole Editorial Team
Editor for TravelMole North America and Asia pacific regions. Ray is a highly experienced (15+ years) skilled journalist and editor predominantly in travel, hospitality and lifestyle working with a huge number of major market-leading brands. He has also cover in-depth news, interviews and features in general business, finance, tech and geopolitical issues for a select few major news outlets and publishers.
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