Twenty parties are interested in recapitalising Virgin Australia, administrator Deloitte said after the first creditors meeting held virtually on 30 April, and the airline aims to receive binding offers in June.
“A large number of parties have expressed an interest, eight have signed non-disclosure agreements and negotiations are continuing with a further 12,” the carrier said in a 30 April statement.
It adds that Deloitte has “moved quickly in its plan to restructure and refinance the business and seek interested parties for a sale” since its appointment on 20 April.
Investment banks Morgan Stanley and Houlihan Lokey have been appointed to run the sale process.
Deloitte intends to seek an extension of the convening period of three months, “based on the scale and scope of their work to position the business for a successful sale”. The carrier says this means the second creditors’ meeting will be held around 22 August, adding that it is “not unusual in a complex voluntary administration such as this”.
Deloitte lead administrator Vaughan Strawbridge said in the same statement: “We are now moving quickly to finalise a business plan to help guide interested parties and, in terms of next steps, mid-May is currently the timeframe for the receipt of indicative offers. Binding offers will then be required in June. We remain confident that our target of achieving a sale by the end of June is achievable.”
He added: “Management had already put in place a transformation plan to enhance profitability. Voluntary administration provides a process where that can be accelerated in a way that it couldn’t before.”
Following the update, S&P downgraded Virgin Australia’s unsecured debt from “C” to “D”, citing the moratorium placed on all the airline’s creditor payments. It expects no such payment to be made between the first creditor meeting and the second one targeted for 22 August.
“During the administration process, the company will explore options to recapitalise the business, or otherwise, realise value from the company’s asset base to maximise returns to creditors,” S&P states.
“We expect that unsecured lenders will be forced to accept less value for amounts owing under the terms of the existing unsecured debt facilities as part of the anticipated debt restructuring and recpaitalisation process.”
In its statement, Virgin Australia says it remains in operation while in voluntary administration, with 64 return domestic services each week, contracted domestic charter flights and federal government-supported international flights to Hong Kong and Los Angeles.