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'Extraordinary interest': Buyers circle Virgin as administrators take over

Business

Administrators say investor interest in Virgin Australia is extraordinary and hope to chart a new path for the airline within months.

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The airline went into voluntary administration on Tuesday and the hunt is now on for new investors to keep it going.
“There is an extraordinary number of parties keen to be involved,” administrator Vaughan Strawbridge, from Deloitte, told reporters on Tuesday.

“This is a matter of months, not longer than that.”

Staff who still have jobs will continue to receive their wages, and eligible staff will get the government’s JobKeeper payments during the administration period.

Virgin Australia CEO Paul Scurrah said the airline had tried but failed to secure the liquidity it needed from shareholders, governments and others.

He said seeking new investment streams was the best way to ensure the airline’s future.

“This is a tough day for our airline … (but) we’re certainly not collapsing,” he said.

“It is our absolute intention to emerge stronger. Australia needs a second airline and we are determined to make sure we are that airline.”

He said the coronavirus pandemic had severed the airline’s oxygen supply, but new investors would hopefully ensure Australia has a second carrier when things return to normal.

The debt-laden company’s plea for a $1.4 billion bailout loan has fallen on deaf ears, with the Government only interested in sector-wide aid packages.

But the company’s hopes of a government bailout appear to be minimal, with Treasurer Josh Frydenberg confident Virgin will survive.

“This is not liquidation. This is not Ansett. This is not the end of the airline,” he told reporters in Canberra on Tuesday.

“This is an opportunity for the airline to recapitalise and for Virgin to come out stronger on the other side of the coronavirus crisis.”

Finance Minister Mathias Cormann is hoping the administration process will present a private-sector solution to save Virgin.
“The Government is not in the business of owning an airline,” the finance minister told ABC News Breakfast on Tuesday.

“But we do want to see two airlines continue and we believe that the opportunities (are) there out of the administration process for that to happen.”

Deloitte’s Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes were on Tuesday morning appointed voluntary administrators of the airline.

They will look at ways to save Virgin, including restructuring debt and recapitalising the business, as private equity firms circle sparking hopes of a sale.

Labor wants Prime Minister Scott Morrison to save the company through extending or guaranteeing lines of credit and taking an equity stake.

Opposition Leader Anthony Albanese appeared alongside Virgin workers who appealed for government action.
“Talk of market-based solutions at the moment is a triumph of ideology over common sense,” he said.

“It’s about time that Scott Morrison put aside the ideological blinkers and gave the support that is required.”

He said it was fanciful for the Government to believe another airline would emerge in the market if Virgin went belly-up.

Transport Workers Union national secretary Michael Kaine said Mr Morrison and his Government would be on the wrong side of history if they didn’t take an equity stake in the carrier.

Senator Cormann said administration would offer Virgin a chance to restructure underperforming parts of the business.
“It offers the opportunity for private sector interest to come forward and buy the business or assist with the recapitalisation of the business,” he said.

“There’s a lot of opportunity from here on in to ensure that there is a viable second airline in Australia moving forward.”
He said those with the first responsibility to step up were its major shareholders, including Singapore Airlines, Etihad and Chinese investors.

Nationals MP David Gillespie said the Government made a mistake in refusing to provide the airline with a $1.4 billion loan.
“I’m disappointed that we weren’t able to support their request for help,” he told The Australian.

“We had two major airlines going into the coronavirus epidemic but it looks like we’ll have just one coming out the other side.”

– AAP

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