Virgin Australia in class action
FORMER Virgin Australia bondholders have accused the airline, its former chief executive Paul Scurrah and former chairman Elizabeth Bryan of omitting financial information from a 2019 prospectus.
London firm Balance Legal Capital is funding a class action filed on behalf of the bondholders in the Federal Court of New South Wales.
The action accuses Virgin Australia of failing to disclose its true financial position in a 2019 prospectus for a capital raising to fund the $700m acquisition of the Velocity frequent flyer program.
Investors were invited to buy unsecured notes at a cost of $100 each, with a minimum spend of $5000.
The prospectus pointed out Virgin Australia had incurred losses over the past three financial years and outlined measures being undertaken to return to profitability.
These included an organisational restructure and costcutting to slash $75m a year, and a supplier review aimed at saving $50m a year.
Less than six months after the capital raising and with the Covid pandemic erupting, Virgin Australia filed for administration with debts over $7bn.
Bain Capital came to the rescue, paying $3.5bn for the airline in a deal that saw the 6500 bond holders receive between 9 and 13 cents in the dollar for their investment.
The lawsuit alleges key financial information was omitted from the prospectus, including the debt available after the transaction and Virgin’s ability to meet its loan duties.
The Matheson Property Group led by Dr Daniel Fleming is the leading party of the
class action which aims to recover millions of dollars invested by bondholders.
“We understand that the proceedings relate to a prospectus issued in 2019, prior to the company entering and subsequently exiting voluntary administration as a privately owned company with new owners and a new management team,” a Virgin Australia spokeswoman said.
“Virgin Australia has not yet been served with the proceedings so it is not in a position to comment on the substance of the matter. Regardless, Virgin Australia does not expect any financial consequence to the company from these proceedings.”
Mr Scurrah and Ms Bryan were also aware of the lawsuit but were unable to comment on the details of the claim.
“Nevertheless, we anticipate any such proceeding will be robustly defended,” said Mr Scurrah and Ms Bryan.
Sydney law firm Corrs Chambers Westgarth had been engaged by Balance Legal Capital to conduct the lawsuit.
The firm provided advice to bondholders during the Virgin administration carried out by a team of corporate insolvency specialists from Deloitte.
Several lawsuits have arisen from the administration, including a stoush over leased aircraft engines that went all the way to the High Court.