Virgin Australia launches US legal action to protect aircraft from being seized

Collapsed airline Virgin Australia has launched legal action in the United States to protect itself from creditors there who are owed billions of dollars.

The move, made on Wednesday ahead of a meeting of creditors in Australia on Thursday morning, is also designed to protect from seizure four of Virgin’s planes that are currently undergoing maintenance at an airport in Nashville, Tennessee.

It comes as the Western Australian mining magnate Andrew “Twiggy” Forrest reportedly put together a consortium to bid for the airline, which collapsed into administration last Monday after the federal government rebuffed its plea for a bailout to cope with the coronavirus crisis.

Virgin Australia collapse: creditors meet amid speculation of steep losses for investors

Virgin, which has been all but grounded by the crisis, owes $6.8bn to about 12,000 creditors.

The administrators, partners at Deloitte, told creditors at Thursday morning’s meeting that they had received bids from a number of “high quality” parties interested in buying the airline, but would not name any of them.

They said they would ask a court to delay a second meeting of creditors by three months. This would push the date of the meeting into late August, by which time the administrators hope to have sold the airline.

Deloitte said eight parties had already signed confidentiality agreements, giving them access to Virgin Australia financial information, and the administrators were in negotiations with an additional dozen.

“They said the reason for this level of interest at such an early stage was partly down to the ‘exceptional team’ Virgin has in its workforce,” the Transport Workers Union national secretary, Michael Kaine, who attended the meeting, told Guardian Australia.

The administration has frozen debts in Australia, but on Wednesday the administrators told a bankruptcy court in New York that unless it orders the insolvency to be recognised in the US “there is nothing to prevent creditors in the United States from commencing enforcement actions against the foreign debtors [the Virgin group] or their assets”.

“This would undermine the administration process in Australia,” they said in documents filed with the court.

US holders of high-interest debt are owed US$775m and there are also American entities among a group of airline financiers and banks owed almost $2.3bn.

“It would be unfair and contrary to the policies underlying chapter 15 for any creditors in the United States to unilaterally pursue remedies in the United States that advantage them over similarly situated creditors in Australia that are complying with the stay and procedures in Australia,” the administrators told the court.

They said that because Virgin Australia was providing repatriation flights to bring Australians home from the US, it was also important “as a matter of public health to avoid disruption resulting from enforcement action taken by creditors in the United States”.

The US court is yet to rule on the request.

Creditors at the meeting on Thursday morning, which was held by videolink, are understood to have asked the administrators about the entitlements of Virgin’s 9,000 staff and whether payments for suppliers would continue.

They also elected a 33-strong committee to oversee the work of the administrators whose members include Kaine, other union representatives, aircraft leasing and finance companies and bondholders.

After the meeting, one of the administrators, Vaughan Strawbridge, said indicative offers were due in about a fortnight.

“Binding offers will then be required in June,” he said.

“We remain confident that our target of achieving a sale by the end of June is achievable.”

Parties other than Forrest reported to be interested in buying the airline include Australian private equity group Ben Gray, American specialist airline investor Indigo Partners and Canadian investment group Brookfield.

Representatives of Forrest could not be reached for comment.

Unions are continuing to push for the federal government to take a stake in the airline.

“We want to see the government taking an equity stake and outlining a plan for the aviation industry,” Kaine said.

“Virgin will not be the only aviation company to run into difficulties and if we are to guarantee jobs in the sector and the businesses and communities across Australia that depend on it, the government needs to end its role as passive observer and reveal its plans.” www.theguardian.com