Virgin administrators Deloitte Restructuring Services has whittled down the five contenders bidding for the struggling airline down to two private equity firms.
US-based Bain Capital and Richard Branson-linked Cyrus Capital Partners are now vying to purchase the airline which is operating in administration.
Australia’s second-largest airline was majority owned by China, Singapore and the United Arab Emirates with Richard Branson retaining a 10 percent stake when it went into voluntary administration in April.
Two bidders are now vying to buy Virgin Airlines with administrators Deloitte Restructuring Services to decide before June 30. Virgin is majority owned by China, Singapore and the UAE
Virgin owed nearly $7 billion to creditors, with its long-running financial struggles exacerbated by the coronavirus pandemic.
Administrator Vaughan Strawbridge said Deloitte had received five initial proposals to buy the struggling airline on Friday and had already shortlisted two candidates.
‘Both Bain Capital and Cyrus Capital Partners are well-funded, have deep aviation experience, and they see real value in the business and its future,’ he said in a release to the Australian Securities Exchange on Tuesday.
Cyrus Capital Partners has offices in New York and London, and has previous airline experience.
The firm launched Virgin America with Virgin Group founder Richard Branson in 2005, before selling it in 2015 to Alaska Air for $2.6 billion.
Former Australian Olympic diver Mike Murphy is heading the Bain Capital bid
It also teamed up with Richard Branson’s Virgin Atlantic to buy Flybe, a British regional airline, in February last year – but the airline went into administration.
Cyrus’s bid for Virgin is structured around keeping the airline together.
Deloitte is understood to have put a high priority on retaining staff.
Under Cyrus ownership, the airline would keep most of its 75 Boeing 737s for domestic routes and its Boeing 777 international fleet – but most of the other types would go, aviation website AirlineRatings.com reported.
Rival Bain Capital’s bid for Virgin is under the stewardship of former Australian Olympic diver Mike Murphy.
He has taken Goldman Sachs onboard as a financial adviser as the investment bank has long-standing links with the airline.
The firm, known colloquially as the vampire squid, has worked with Virgin since 2000 on capital raisings, derivative funding, and merger and aquisition advice.
The investment bank also helped Virgin raise US$800 million secured against 24 aircraft in 2013.
Former Jetstar chief executive Jayne Hrdlicka (pictured in 2016) is providing local aviation experience to US firm Bain Capital for its bid. There are rumours if Bain wins she may be CEO
At least eight parties were initially interested in bidding for the airline, Deloitte said in April
Virgin founder Richard Branson has longstanding links to Cyrus Capital, whose bid is structured around keeping the airline together including full service international flights
Bain Capital wants Virgin to move closer to its budget roots, and has talked publicly about its ambitions in recent weeks.
The US-based private investment firm, headquartered in Boston, Massachusetts, has about US$105 billion in assets under management and owns Trans Maldivian Airways.
Who owns Virgin Australia?
Abu Dhabi government – 21%
Singapore government – 20%
Nanshan Capital (China) – 20%
HNA (China) – 20%
Richard Branson – 10.4%
Australian shareholders: 8.6%
Source: Virgin Australia annual report
Bain has brought in former Jetstar chief executive Jayne Hrdlicka, who has local aviation experience, to advise it on its bid.
There is speculation she may take over as Virgin CEO from incumbent Paul Scurrah if Bain wins the bidding.
After being appointed as administrators on April 20, Deloitte moved to restructure and refinance the business and began talking to potential buyers with at least eight different parties initially showing interest.
The three contenders who didn’t make the second round were BGH Capital, Indigo Partners and Canadian firm Brookfield Asset Management.
Australia’s domestic airline market, a duopoly ruled by Qantas and Virgin, has proven attractive to investors even as the coronavirus pandemic has grounded the world’s airlines.
Mr Strawbridge told the ASX he was satisfied that strong interest from all the bidding parties had generated competitive tension, putting them in a strong position to get the best outcome for creditors.
Deloitte would spend the coming weeks in meetings with the potential buyers and Virgin stakeholders before receiving the final binding bids, Mr Strawbridge said.
Deloitte expects a binding agreement before June 30.