SYDNEY/HONG KONG (Reuters) – Private equity and distressed situation specialists Apollo Global Management, Oaktree Capital Management and BGH Capital are among those that have expressed interest in restructuring Virgin Australia Holdings Ltd <VAH.AX>, five sources said.
Virgin on Tuesday entered voluntary administration in an attempt to restructure its crippling A$5 billion ($3.2 billion) debt load as it struggles with a lack of demand due to the coronavirus pandemic, making it the Asia-Pacific region’s biggest victim of the crisis gripping the airline industry.
The company’s administrators said they would hold a first meeting of creditors on April 30 and have retained Houlihan Lokey to advise them on restructuring the airline.
More than 10 parties have already expressed interest in restructuring the country’s second-biggest airline, Vaughan Strawbridge, one of the four partners from Deloitte who were appointed as administrators, said on Tuesday.
The three private investment groups are interested because they are experienced airline investors, said one of the sources, who has direct knowledge of the situation. The five sources declined to be named because they were not authorized to speak with media.
BGH and Oaktree declined to comment. Apollo did not return requests for comment.
The administrators are looking to execute a binding deal with a buyer by the end of June, The Australian Financial Review reported, citing a confidential flyer sent to interested parties.
The flyer said an information memorandum would be available to potential buyers by the end of April, there would be an updated management plan ready in early May, non-binding indicative offers would be due in mid-May and binding bids would be due in mid-June, the newspaper reported.
As of Dec. 31, Virgin had A$1.8 billion of unsecured bonds that will be key to a restructuring deal.
“What they need to do is to get rid of some liabilities and then attract new investors,” said a lawyer representing creditors, who was not authorized to speak publicly about the matter.
Nomura’s credit trading desk said it put the company’s value at A$2.3 billion as a going concern under a restructuring that maximizes its valuation, which would value the unsecured bonds at around 20-25% of the issue price.
If the bankrupt airline was liquidated instead of restructured, bondholders would only get around 10% of the issue price or less, Nomura said.
The airline’s entry into administration could give any successful bidder the chance to free it from a complex ownership structure that has slowed decision making and been blamed for years of losses.
Several analysts said the best option for Virgin under a new owner would involve getting rid of its wide-body jets and turboprops and keeping its Boeing <BA.N> 737s, the backbone of its domestic fleet.
As of Dec. 31, Virgin had 132 planes, of which 69 were leased and 63 were owned.
The lessors with the biggest financial exposure to Virgin include Goshawk, Aviation PLC <AVAP.L>, Aercap Holdings NV <AER.N>, ORIX Aviation and SMBC Aviation Capital, each with estimated income from the airline of at least $1 million a month, according to aviation data provider Cirium.
(Reporting by Paulina Duran and Scott Murdoch; additional reporting by Kane Wu in Hong Kong and Jamie Freed in Sydney; writing by Jamie Freed Editing by Gerry Doyle)