A long-term airline investor with deep ties to Richard Branson’s Virgin Group has emerged as one of the four final bidders vying to take over Virgin Australia, following the shock exit of Canada’s Brookfield Asset Management as one of the leading contenders.
New York-headquartered investment fund Cyrus Capital moved through to the next round of the Virgin sale run by administrators Deloitte on Monday, alongside US private equity firm Bain Capital, local fund BGH and American budget airline owner Indigo Partners, sources close to the process said.
Virgin collapsed in April owing $6.8 billion after it was unable to land a restructuring deal to help it survive the COVID-19 crisis, which has forced the airline to ground most of its operations.
Deloitte’s lead administrator Vaughan Strawbridge would not confirm which parties had proceeded to the second round, however he said he was “delighted by the strength of each of those on the shortlist” and that each bidder was “well funded and possessing deep aviation experience”.
Canadian asset manager Brookfield walked away from the sale unhappy with the way it has been run, as flagged by the Sydney Morning Herald and The Age on Monday morning. The group, which manages $US515 billion ($800 billion) in assets globally, did not think the sale process could be completed by the August deadline with more than one bidder allowed through to the second round, sources said.
Cyrus Capital was a surprise addition to the final field, chosen from about eight indicative bids submitted on Friday. The distressed debt specialist previously invested alongside Mr Branson’s Virgin Group in Virgin America before it was taken over by Alaska Air in 2018.
Cyrus, Virgin Atlantic (51 per cent owned by Mr Branson) and Irish aviation group Stobart Group teamed up to buy the British regional airline Flybe in February 2019 with the intention of rebranding it as Virgin Connect.
However, Flybe went into administration on March 5 this year after being unable to secure a government loan to help it survive the COVID-19 crisis.
The Arizona-based Indigo Partners owns stakes in the low-cost carriers including America’s Frontier Airlines, European group Wizz Air, South America’s JetSMART and Mexico’s second-largest airline Volaris, and has been interested in Virgin for several years.
All Indigo’s airline investments are in ultra-low cost carriers and it is not clear if it would want to take a similar approach with Virgin if it is the successful bidder.
Bain, which has $US105 billion ($165 billion) in assets under management, is being advised by former Jetstar boss Jayne Hrdlicka and restructuring experts KordaMentha, which managed the Ansett insolvency two decades ago. The fund also has a close relationship with Mr Branson through their recent cruise liner joint-venture business Virgin Voyages.
Melbourne-headquartered private equity group BGH is working with AustralianSuper on its bid and is expected to promote its “team Australia” credentials.
The second-round bidders will meet Virgin’s existing management, aircraft lessor, airports and unions ahead of submitting binding rescue proposals by June 12. Creditors will vote on a proposed deal in mid-August.
This story originally appeared in the Sydney Morning Herald. Read the original story here.
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