Dubai Aerospace Enterprise among Virgin Australia lessors
Virgin Australia Holdings owes A$6.9 billion ($4.39 billion) to more than 10,000 creditors based on an initial review, and will seek a three-month payment waiver from aircraft lessors, its administrators said.
Virgin said this week it succumbed to third-party led restructuring that could lead to a sale, turning Australia’s second-biggest airline into the Asia-Pacific’s biggest victim of the coronavirus crisis. The figure owed to creditors includes about A$2.3 billion of secured debt, A$2 billion of unsecured bonds, A$1.9 billion of aircraft leases, A$450 million owed to employees, A$167 million to trade creditors and A$71 million to landlords, according to an affidavit from administrator Vaughan Strawbridge.
The bankrupt airline’s administrators are liable to pay leases on its aircraft starting April 28, because they will not inform lessors whether they would renege on leases within five business days, as required by law, the documents, posted on the website of Strawbridge’s firm Deloitte, showed.
The Deloitte administrators are seeking court orders for an extension of up to four weeks from their appointment to decide if leased planes are required for continuing operations of the business.
“Next week we will be wanting to engage with you to firm up on interim arrangements with the administrators to support the process being followed to achieve a recapitalization and sale, which will include a request for a threemonth waiver of rent and other financial payment obligations,” they said in a letter.
A document released by the Federal Court of Australia showed law firm King & Woods Malleson (KWM) said it was representing 17 aircraft lessors and financiers. These include Aercap Holdings
NV, Bank of China, SMBC Aviation Capital, ORIX Aviation, GECAS, Dubai Aerospace Enterprise, Bank of America Corp. and BNP Paribas SA.
The lessors with the biggest financial exposure to Virgin include Goshawk, Avation PLC, Aercap, ORIX and SMBC, each with estimated monthly income of at least $1 million from the airline, aviation data provider Cirium said. KWM said its clients wanted to work with the administrators, but required them to pay for regular maintenance and insurance and report on the use of aircraft.
Perth Airport said it had seized a number of Virgin Australia aircraft that were parked there not currently conducting flights to protect the airport’s interests, given the airline had “significant” outstanding invoices.
“Perth Airport has taken liens over a number of Virgin aircraft — a standard practice in these situations,” a spokeswoman said. Sydney Airport and Melbourne Airport said they had not seized Virgin aircraft. “We prefer to work constructively with our airline partners through this period,” a Sydney Airport spokesman said. For now, Virgin is flying a skeleton schedule under its regular management team as administrators seek a buyer for the entire operation.
Private equity and distressed situation specialists Apollo Global Management, Oaktree Capital Management and BGH Capital are among more than 10 firms to express interest in the restructuring, Reuters has reported, citing five sources.
HIGHLIGHTS ● Airline has more than 10,000 creditors.
● Entered administration due to virus crisis.
● To seek three-month rent waiver from lessors.