Two parties representing Virgin Australia bondholders have challenged the airline’s sale to Bain Capital with the intention of making an alternative proposal.

In an application to the Australian Takeovers Panel, Singapore-based fund manager Broad Peak Investment Advisers (Broad Peak) and Hong Kong’s Tor Investment Management submit that “certain circumstances regarding the process conducted by [Virgin Australia’s voluntary administrators, Deloitte,] are unacceptable and have the effect of precluding an alternative deed of company arrangement being presented to VAH’s creditors at the second creditors’ meeting.”

Broad Peak represents Broad Peak Master Fund II and Broad Peak Asia Credit Opportunities Holdings in the application.

The panel is a statutory authority with the power to make orders to protect the rights of persons during a takeover bid, especially target company shareholders. It said in a 6 July media release: “The applicants each manage, represent or advise certain funds that are existing substantial noteholders of VAH, which are large, unsecured creditors in the administration. The applicants participated in the publicly announced process to restructure and refinance the VAH business undertaken by the administrators.”

It adds that the parties seek interim orders regarding access to information, including the terms of the proposed sale to Bain, and seek final orders including those to allow them to make an alternative proposal.

Bain and Cyrus Capital Partners were on the final shortlist, and Deloitte received from them binding proposals on 22 June.

Deloitte announced on 26 June that Bain Capital won the bid and entered into a sale and implementation deed, one that is “subject to minimal conditions precedent such as regulatory approvals”, having received approval by the Australian Treasurer pursuant to the Australian Foreign Investment Review laws.

In the same announcement, Deloitte indicated that it received, among others, an alternative proposal “from the representatives of an ad hoc group of bondholders of the Virgin Australia Group” on 24 June.

Broad Peak was among a group of bondholders owed around A$2 billion ($1.4 billion), which proposed to Deloitte a debt-to-equity swap plus a fresh capital injection of around A$1 billion into Virgin Australia, according to a 24 June Reuters report.

Broad Peak Fund II, managed by Broad Peak, was among Temasek Holdings’ top three fund investments as at 31 March 2019, Temasek said in an offering circular dated 15 July 2019.

The Singapore government-owned investment company is Singapore Airlines Group’s largest shareholder, which in turn is Virgin Australia’s second-largest shareholder, with 20.09% voting power, according to its 2019 annual report.

In its 26 June announcement, Deloitte committed to holding a second creditors’ meeting before the end of August.

It said in a 29 June declaration: “As at the date of this correspondence, we do not expect there will be sufficient recoveries to repay creditors in full.

“On this basis… we declare that we have reasonable grounds to believe that there is no likelihood that shareholders of VAH will receive any distribution for their shares.”