All employee entitlements will be paid in full and unsecured creditors will receive a partial return as part of Bain Capital's $3.5 billion acquisition of ailing airline Virgin Australia (ASX: VAH).
Revealed today in Deloitte's second report to creditors, unsecured creditors will see a return of between $462 million and $612 million if the deed of company arrangement (DOCA) is approved.
This means unsecured creditors are expected to receive between 9 and 13 cents in the dollar on their claims.
The report comes ahead of a crucial vote on the airline's future on 4 September, at which creditors will decide whether to accept Bain's DOCA, return the company to the control of the directors, or put it into liquidation.
The proposed DOCA also ensures customer travel credits will be honoured and a number of supply and finance arrangements will continue.
"We have set out our opinion to creditors that it is in their interest to approve the deed of company arrangement proposed by Bain as it provides for the best return to creditors in what are extraordinary circumstances, and that were impossible to foresee," says joint voluntary administrator and Deloitte restructuring partner Vaughan Strawbridge.
"This will provide certainty for the business under new and committed owners. It provides certainty for employees and customers. It provides a return to creditors. And it can be completed sooner, and at less cost to creditors.
"It achieves all the objectives of the voluntary administration process that we sought from the outset. Now we just need to bring the airline out of administration as soon as possible."
Given that unsecured creditors will not be paid in full, there will be no return to the shareholders of VAH.
As part of the DOCA Deloitte will make an application to the court for the transfer of the shares in VAH to Bain.
Bain Capital was selected as the successful bidder for Virgin Australia in late-June after competing firm Cyrus Capital Partners pulled out of the running at the last minute.
As part of the acquisition, Virgin will bid farewell to its budget brand Tigerair as part of a business reset and approximately 3,000 jobs will be cut.
Virgin will simplify its fleet and retain only Boeing 737 aircraft plus its regional and charter planes. ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft types will all be retired.
The group will also undertake a supplier contract review across its operations including products, services and facilities to better align with the company's new size as a smaller airline.
Further, it will consolidate its footprint and move its corporate headquarters to 275 Grey Street in Brisbane's Southbank.
Business News Australia
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