Bain bids $2.5B on Virgin Australia, Etihad and SIA lose millions

Civil Aviation virgin_australia_a330-200_flare_8117774706.jpg

Bain Capital made a $2.5 billion (AU$3.5 billion) bid over Virgin Australia. Under the proposal, Virgin Australia’s unsecured bondholders would be repaid 9% to 13% of their claims. Shareholders, however, will not receive any cashback, including Etihad and Singapore Airlines (SIA1) (SINGY) (SIA) that owned 21% and 20% of Virgin Australia’s shares, respectively. 

The $2.5 billion (AU$3.5 billion) sum provided by Bain Capital would go to Virgin Australia’s customer travel credits, staff and debt payments, revealed the airline’s administrator Deloitte on August 25, 2020. According to the firm, Virgin Australia bondholder’s repayments of 9 cents to 13 cents on the dollar remained subject to a negative change if the proposal got voted down.

Since the company does not have enough money to pay its creditors, shareholders would not be paid a single dime out of the AU$3.5 billion bailout. This means that airlines like Etihad Airways and SIA will have lost millions of dollars. 

Etihad bought its first 10% stake back in September 2012, which was later increased to 24% and then cut back to 21%. Singapore Airlines (SIA1) (SINGY) purchased its initial 10% stake a month later than Etihad and raised it to 20% in April 2013. 

When Virgin Australia went into a voluntary administration in April 2020, Etihad and SIA’s shares were valued at around $109 million and $100 million, respectively. In comparison, over the eight years, Etihad purchased shares of the Australian carrier worth around $170 million, while SIA – around $140 million. 

On April 21, 2020, Virgin Australia has entered voluntary administration under Bain Capital. The firm’s plan included 6,000 employee job cuts and discontinuation of its low-cost subsidiary Tigerair Australia. Additionally, the carrier set to remove its ATR-72, Boeing 777 and the Airbus A330 fleets in favor of a simplified all-Boeing 737 mainline fleet.