Virgin Australia bondholders pull rival sale plan

Virgin Australia Holdings bondholders have withdrawn their plans to issue an alternative proposal on the future of the insolvent airline holding firm, which they said in July would rival one from Boston-based private equity firm Bain Capital. A spokesman for the bondholders said on August 21 that they had cancelled their Deed of Company Arrangement (DOCA) to recapitalise the holding, which is still is in voluntary administration, similar to Chapter 11 bankruptcy provisions in the United States. The bondholders that planned to issue the DOCA – the hedge funds Broad Peak Investment Advisers in Singapore and Tor Investment Management in Hong Kong – hold around AUD300 million Australian dollars (USD216 million) of Virgin Australia’s AUD2 billion (USD1.44 billion) of unsecured bonds, which is in turn part of nearly AUD7 billion (USD5 billion) owed to creditors, Reuters reported. The withdrawal followed a Federal Court of Australia ruling on August 17 that threw out their application to force administrator Deloitte to put the plan to a vote at a creditors’ meeting scheduled for September 4, alongside the Bain deal. Deloitte successfuly argued that the sale to Bain, agreed to in late June, is legally binding and prevents any other proposal from being considered, the Sydney Morning Herald reported. “Australia deserves a strong second airline and we genuinely believe our recapitalisation proposal is the best long-term option for Virgin Australia and its stakeholders,” the spokesman said. “Unfortunately, for now, we are left with no choice after the Federal Court decision but to withdraw our proposal.” Deloitte has said it will issue a report to creditors on August 25 explaining what they can expect to receive under the Bain deal. “After the release of the administrator’s report, we reserve our rights to take whatever action is necessary to protect our interests as creditors,” the bondholders’ spokesman said.