Virgin Australia sale draws strong interest

  • Aviation
  • Friday, 15 May 2020

Virgin Australia Holdings Ltd is expected to receive as many as eight non-binding indicative offers from potential buyers on Friday,

SYDNEY/HONG KONG: Virgin Australia Holdings Ltd is expected to receive as many as eight non-binding indicative offers from potential buyers on Friday, which will be whittled down over the next few days to a shortlist of about three, its administrators said.

The country's second-biggest airline entered voluntary administration last month, owing creditors nearly A$7 billion ($4.5 billion) and making it the biggest Asia-Pacific casualty of the coronavirus crisis hitting the global aviation industry.

The administrators at Deloitte aim to agree a deal with a buyer by the end of June.

Australian media have reported private equity groups BGH Capital, Bain Capital and Brookfield are leading contenders to buy the business.

A Bain spokesman confirmed the company intends to bid. Brookfield has already lodged an offer, according to a source with direct knowledge of the matter.

Brookfield declined to comment and BGH did not immediately respond to requests for comment.

India's InterGlobe Enterprises, the biggest shareholder in that country's largest airline IndiGo, has also lodged a bid, according to a person with direct knowledge of the matter.

InterGlobe said in a statement on Friday it was participating in the Virgin sale process but declined to provide further details.

The high-level interest in Virgin Australia at a time when the world aviation market is largely grounded shows the long-time attractiveness of the Australian domestic market, a duopoly between Qantas Airways Ltd and Virgin.

Administrator Vaughan Strawbridge said in a statement that eight of the nearly 20 parties that had accessed the company's data room had been advanced enough in their interest to be given its forward-looking Virgin 2.0 business plan.

"Up to now, we've certainly seen a high level of interest from a significant number of high-quality parties, many of whom are capable of completing a transaction of this size and complexity," Strawbridge said.

"From here, we will start working even more closely with the short-listed parties."

This would involve access to more detailed business information and management presentations, he added.

Binding offers for Virgin are due on June 12, Strawbridge said, adding the sale timetable was aggressive but one he was confident of achieving.

Robert Martin, the CEO of BOC Aviation which leases aircraft to Virgin Australia, said it looked like the airline would survive.

"Clearly if you are one of two players in a duopoly market which is going to stay as a duopoly market for the foreseeable future it is an attractive investment," he told Reuters.

"So I think Virgin Australia will probably come through."

Morgan Stanley and Houlihan Lokey are advising the administrators on the sales process.

($1 = 1.5489 Australian dollars) - Reuters

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