Virgin Australia: Creditors meeting

The Administrators for Virgin Australia held their first creditors’ meeting today. The meeting was virtual – in keeping with social distancing protocols, with about 1300 creditors represented. The meeting was closed to the media. There is a statement to the ASX, and Reuters, amongst others, is reporting the following:

• Appointment of a Committee of Inspection representing the various creditor groups, to be used by Deloitte as needed
• coupon payments to bondholders have been halted – to preserve the companies cash balance
• Morgan Stanley and Houlihan Lokey have been appointed to assist in the sale of the airline in the next 4 months
• Deloitte’s to request a three-month extension for the deadline to hold a second creditors meeting, delaying it from 22 May to 22 August 2020
• 20 parties have expressed interest in purchasing Virgin Australia, including Andrew (Twiggy) Forrest of Fortescue Metals fame, with Credit Suisse as an advisor
• Only 8 of those expressing interest have signed non-disclosure agreements and received an Information Memorandum. Negotiations continue with the other 12

“We are now moving quickly to finalise a business plan to help guide interested parties and, in terms of next steps, mid-May is currently the timeframe for the receipt of indicative offers. Binding offers will then be required in June. We remain confident that our target of achieving a sale by the end of June is achievable,”

Vaughan Strawbridge, Administrator, Deloitte, from the ASX statement

Virgin Australia continues to operate 64 return weekly domestic flights, as well as contracted domestic charter flights and government supported international flights to Hong Kong and Los Angeles

2PAXfly Takeout

So it looks like mid May will be the next date for any substantial news, when official offers for the airline will be received by the Administrator.

The seeking of an extension of time for the holding of the second creditors meeting could be interpreted in several ways. It may be because of the complexity of the business and the time potential bidders will need to compile their bid. Or it could be because of the number of bids likely to be received and the time it will take the Administrators to consider them and provide a recommendation to creditors.

It looks like the initial prediction by the voluntary administration team of a quick process is already being stretched.