Virgin creditors accept terms ahead of Bain Capital handover

Virgin creditors accept terms ahead of Bain Capital handover

Virgin Australia CEO Paul Scurrah says the airline is closer to exiting administration after a successful second meeting of creditors today, with expectations shares will be transferred to Bain Capital by 31 October.

The US fund is buying out the group for $3.5 billion, and its 10 proposed deeds of company arrangement (DOCAs) covering 41 Virgin Australia-associated entities were approved by creditors in an online meeting.

Deloitte administrators Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes have confirmed the DOCAs will be signed, and completed, within 15 business days.

The DOCAs provide for the previously announced partial return of funds to unsecured creditors, in the range 13 and 9 cents in the dollar on claims from funds of $462 million and $612 million.

Once shares have been transferred a proposed creditors' trust is set to be created to adjudicate claims and pay distributions, all undertaken by the Deloitte Restructuring Services partners as trustees.

The timing of the payment of the dividend to creditors has been estimated at between six and nine months from completion of the sale transaction.

The DOCAs also provide for the value of all customer travel credits and prepaid flights provided post-administration; continued employment for the majority of employees and entitlements paid in full, including for those leaving the business; the continuation of the Velocity Frequent Flyer program; the retention of aircraft and equipment; and interim funding and acceptance of economic risk by Bain from 1 July 2020.

"This outcome provides certainty for employees and customers, a return to creditors, opportunities for suppliers and financiers to continue to trade with the Virgin Australia Group as well as maintaining a competitive Australian aviation industry for the benefit of consumers," says joint voluntary administrator Vaughan Strawbridge.

"While the outcome of the meeting today is a significant milestone for both the future of Virgin Australia and Australia's aviation industry more broadly, we also acknowledge those loyal Virgin Australia Group employees who will lose their jobs and the difficulties that this will cause them and their families as well as the numerous suppliers and investors who will not receive all of the monies owed to them.

"The outcome has also been achieved due to the incredible support from Virgin management and staff, unions who have played an important part in securing the future jobs for so many of their members, financiers, service providers, trade suppliers, and other key stakeholders including the federal government."

However, Strawbridge explained there was still a lot of work to do to complete the restructuring of the airline and complete the sale transaction before the business is ready to emerge from Voluntary Administration under Bain Capital's ownership.

Virgin Australia CEO Paul Scurrah says it is vital for the country to have two major airlines for consumer choice, value airfares and to help support the recovery of a robust tourism sector after this crisis is over.

"This is an important outcome for Virgin Australia, which brings us closer to exiting administration and allows us to focus on the future," says Scurrah.

"While we can feel very proud that we have got to this point, the impact of COVID-19 remains very challenging for our business and industry. These are tough times and we must remain focused and adapt to this new environment.

"It's been an incredibly tough journey for our people and they should be commended for how they have handled themselves. I'm pleased today gives us some more certainty around the company's future."

Updated at 2:16pm AEST on 4 September 2020.

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