Bain Capital wins battle to acquire Virgin Australia

Bain Capital will take control of Virgin Australia after seeing off rival bidders for the stricken airline, whose business has been pummeled by the coronavirus pandemic.

Deloitte, the carrier’s administrator, said on Friday that the US private equity group had signed a deal to acquire Virgin, which would result in its recapitalisation.

The administrator said Virgin Australia equity holders would be wiped out as a result, while bondholders faced uncertainty over how much they would receive.

The deal follows a two-month auction that culminated on Friday morning with Bain’s main rival, Cyrus Capital Partners, withdrawing from the process, citing a “lack of engagement” from administrators. Cyrus — another US private equity firm — said in a statement that Deloitte had not returned calls or emails regarding its offer since Monday.

Bain told Australian media that Virgin would restart operations in September with up to 6,000 of its 9,000 employees and 60-70 aircraft operating. It has backed the existing Virgin management team led by chief executive Paul Scurrah.

“Our investment and plan for the airline will support and celebrate Virgin Australia’s unique culture and protect as many jobs as possible for the short and medium term in a way that will make significant jobs growth possible,” said Mike Murphy, managing director at Bain Australia.

But trade unions and analysts warned that Virgin faced enormous challenges in its attempt to recapitalise and grow during the pandemic that has battered international travel. Virgin will also face a tough domestic competitor in Qantas, which this week raised A$1.9bn and slashed 6,000 jobs in its own recovery bid.

The country’s Transport Workers Union called on the Australian government to provide support and funding to stabilise the industry during Covid-19.

Deloitte and Bain did not release financial details of the successful bid, which creditors will vote on before the end of August. Virgin’s existing shareholders — including Singapore Airlines, Etihad Airways, HNA, China’s Nanshan group and Richard Branson’s Virgin Group — will get no return from the administration process.

A group of Virgin bondholders, which submitted a rival recapitalisation plan to Deloitte this week, could seek to upend the Bain deal at a creditors’ meeting in August or through a legal challenge. A spokesman for the group was not immediately available for comment.

Bain is expected to negotiate with Virgin Group over the rights to continue to use the brand.

Virgin Australia was one of the first big airlines to collapse when Covid-19 brought almost all air travel to a halt in March. The carrier owes creditors about A$7bn.