U.S based investors Cyrus Capital Partners has made the shock announcement that they are withdrawing their bid to take ownership of Virgin Australia (VA) at the last minute, citing the airline’s administrators not getting back to them as a primary reason.
Cyrus Capital Partners was one of the two final bidders for the debt-ridden airline along with fellow American private investors Bain Capital.
In a statement, Cyrus Capital Partners cited the main reason for pulling out as being that “administrators have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer,” since they submitted their offer.
The statement read:
After thousands of hours of detailed due diligence, business planning and stakeholder engagement from Cyrus and its advisers over the past two months, Cyrus has decided to withdraw its offer to acquire Virgin Australia, due to lack of engagement by the Administrator.
On the morning of 22 June 2020, Cyrus presented to the administrators of Virgin Australia Holdings an offer to acquire the airline, its regional business and the frequent flyer program Velocity, in accordance with the administrators’ procedures. However, since then, the administrators have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer.
On the morning of 25 June 2020, Cyrus submitted a further unsolicited package of value improvements and other compelling measures to increase the value of the transaction, improve the return to unsecured bondholders and deliver more certainty for the administrators. This too received no response other than an acknowledgement of receipt.
Despite the material improvements put forward, the administrators have still not engaged with Cyrus on its offer.
As a result, Cyrus has withdrawn its offer today, 26 June 2020.
What happens now?
Today’s shock news leaves Bain Capital as the only remaining bidder, but that still doesn’t guarantee they will become the new owners.
Boston-based Bain Capital is one of the world’s leading private investment firms, bringing in local aviation experience with the assistance of former Jetstar chief executive and American based in Australia, Jayne Hrdlicka.
The rumours are that if Bain Capital does take over Virgin Australia, Ms Hrdlicka could even replace Paul Scurrah as Virgin’s new CEO.
There has also been intense media speculation all week that major bondholders, who stand to lose a large part of their investment in Virgin as a result of its collapse, are preparing a last-minute buyout proposal to try and gazump the private equity bidders.
And just to complicate things further, Cyrus Capital Partners founder Stephen Freidheim has now left the door open to a renewed bid if VA’s administrators Deloitte come to the party and return his calls.
“Cyrus firmly believes that the Australian aviation industry has a bright future and would be willing to re-instate our offer if the administrators agree to re-engage in good faith, productive discussions with a view to concluding a transaction that will benefit all key stakeholders – employees, customers, Velocity members and bondholders,” Mr Freidheim said in the statement.
The shock news comes a day after Qantas announced 6,000 job losses as part of a three-year plan to accelerate its recovery from the COVID crisis and “create a stronger platform for future profitability, long-term shareholder value and to preserve as many jobs as possible.”
Deloitte said the administrators handling the VA deal will now assess the bids with a view to selecting a preferred bidder by Tuesday 30 June.
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