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‘Serious contender’: Queensland government to bid for Virgin Australia as race tightens

Sources said QIC was still working through who will be a part of its consortium and is yet to disclose its partners. However it plans to talk to investors it has previously worked with, the sources said, while it has also approached other consortiums bidding for Virgin with an offer to contribute equity in return for the airline staying in Brisbane.

Nineteen parties are looking at Virgin’s books after its collapse last month with debts close to $7 billion after the COVID-19 crisis forced it to ground almost its entire fleet.

US private equity firm Bain Capital, which counts the Future Fund among its own investors, is increasingly viewed as a strong contender for the airline. BGH Capital, which is backed by AustralianSuper, has long been considered the front runner.

Sources said the Future Fund was not currently looking at a co-investment in Virgin alongside Bain. However Bain is expected to use the Future Fund’s involvement to boost its credibility in the eyes of the public, workers and the Foreign Investment Review Board against BGH’s “Team Australia” bid.

Bain, which has $US105 billion ($165 billion) in assets under management, has established a heavy-weight team for the Virgin bid by enlisting former Jetstar boss Jayne Hrdlicka and restructuring experts KordaMentha, which managed the Ansett insolvency two decades ago.

Bain also has an existing relationship with Virgin Group boss and Virgin Australia co-founder Richard Branson, who still owned 10 per cent of the airline when it collapsed, through their recent cruise liner joint venture business Virgin Voyages.

Sources said Mr Branson is not believed to have formally joined any bidding groups but is talking to bidders with the expectation he will join the winning party’s team and contribute equity to the deal in order to maintain the Virgin brand in Australia.

Up for negotiation is how much the airline will pay to use the Virgin brand. The airline was paying around $15 million a year before its collapse, sources say. Some of the bidders believe they do not need the Virgin brand to be successful and would rather re-brand the airline than pay a yearly licence fee.

Mr Branson on Monday sold $US485 million ($742 million) of shares in his space flight venture Virgin Galactic to use to prop up his ailing airline businesses, as his 51 per cent owned Virgin Atlantic also flights for survival.

Meanwhile, Virgin’s administrators won the right to issue flight credits to customers at a court hearing on Wednesday. However, the court stopped short of granting administrators the right to waive their personal liability for costs they rack up in administration after concerns from the Federal government’s attorney general department and the Australian Taxation Office.

Administrators were concerned they could be made to pay any tax bill arising from any accidental incorrect payments of JobKeeper subsidies to Virgin’s staff. The administrators and the court agreed to give the government departments until Friday to consider the request.

US airline investor Indigo Partners, which owns a string of budget carriers, has explored a Virgin Australia buyout, while Indian aviation tycoon Rahul Bhatia was also reported this week to be interested.

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