Bain Capital, a U.S. private investment firm, has been announced as the winning bidder for insolvent Virgin Australia after the rival bidder withdrew its offer.
The bankrupt Brisbane-based company’s administrators agreed on Friday to sell the ailing airline to the Boston-based private equity firm.
Private equity firm, Cyrus Capital Partners, withdrew its offer in the morning, citing a lack of engagement from Deloitte, an accounting firm responsible for the administration, which was set to name a preferred bidder on Tuesday.
Virgin Australia entered voluntary administration in April due to the coronavirus and after it failed to secure a government bailout, leaving some 16,000 jobs up in the air.
The group’s airlines flew to 41 destinations, including major cities and regional communities, and contributed around AD11 billion ($7.6 billion) to the Australian economy every year.
Deloitte’s administration team said on Friday the sale and implementation deed should be completed before the end of August, subject to approvals, including a vote of creditors.
Vaughan Strawbridge, one of the administrators, said in a statement that the sale “will secure the future of Australia’s second airline, thousands of employees and their families’’.
Deloitte said the transaction will carry forward all frequent flyer-booked flights, honours all employee entitlements and supports the current management team.
The Bain sale plan could still be scuttled by Virgin’s bondholders who are owed AD2 billion.
They have presented a last-minute buyout proposal to take control and recapitalise the airline, which will be considered at the August meeting of creditors alongside Bain’s offer.
Virgin Australia, which has about 130 aircraft, has been struggling to pay about AD7 billion in debt.
Australian Prime Minister Scott Morrison said on Friday he was “pleased a successful bidder emerged from the process’’.
“I look forward to Virgin going forward and more importantly for the jobs in Virgin to be secured,’’ he told reporters in Canberra.
“It’s a sector… that faces very significant difficulties.’’
Virgin Australia’s Chief Executive, Paul Scurrah, said on Friday the airline’s management “will now work closely with Bain Capital on its vision for the business moving forward’’.
“Bain Capital has spent many hours over the past weeks speaking to us and getting a deep understanding of our business and working to secure a deal with our administrators,’’ Scurrah said in a statement.
“It was always the goal to bring our airline out of administration as quickly as possible in a stronger financial position and this announcement brings us a step closer to that.’’
Virgin Australia had previously operated around 31 per cent of domestic flights, while Qantas controlled around 58 per cent of flights within the country.
Thousands of Virgin Australia staff have already been stood down and its fleets are largely grounded due to COVID-19 travel restrictions.
In an interview with Australian Financial Review newspaper, Bain’s Australian Managing Director, Mike Murphy, said Virgin would have up to 6,000 employees from 10,000 earlier and 60 or 70 planes when it resumes flying in September.
Australian flagship carrier Qantas is also struggling, but the airline was doing much better than Virgin Australia financially before the coronavirus crisis started.
Qantas on Thursday announced it would cut 6,000 jobs and continue to stand down 15,000 employees due to the fallout from the pandemic.
Politicians, aviation experts and industry officials have all said that Qantas would effectively have a monopoly in the Australian skies if Virgin Australia collapses.
Australia has extremely limited and slow rail lines across the vast country, so most people depend on domestic air travel.