Virgin cleared for takeoff as rival rescue plan rejected
The Federal Court has shot down an alternative rescue plan proposed by Virgin Australia bondholders, leaving the way clear for Bain Capital to proceed with its own recovery plan for the failed airline.
Two key bondholders owed $300m by the airline failed to convince Federal Court judge John Middleton Monday to allow their proposal to be put to creditors in an electronic ballot next month.
Virgin Australia collapsed on April 21 with debts of $6.8bn with administrators Deloitte seeking to offload the carrier to new owners. A sale agreement was signed with Bain Capital for an undisclosed sum two months later.
That deal in the form of a "deed of company arrangement" (DOCA) will be put to creditors for a vote at their second meeting on September 4.
Lawyers for bondholders Broad Peak and Tor argued that their clients were entitled to put an alternative deed of company arrangement (DOCA) to creditors for a vote.
However, lawyers for Deloitte said the sale had already occurred and it was now just a matter of how that would proceed.
Bain said it welcomed the court decision and said its key focus was getting through the administration "to ensure Virgin Australia fights another day and has the chance to rebuild."
"We have developed a plan that will secure approximately 6,000 jobs once market demand recovers, with the potential to increase to 8,000 jobs in the future," a Bain spokesman said.
"We all want a stronger, more profitable and competitive Virgin Australia coming out of voluntary administration, and will continue to focus on making that happen."
The bondholders last month said they had a "superior" alternative rescue plan for the carrier but accused Deloitte of stymying the proposal for not giving them timely access to confidential information on how the successful Bain Capital proposal was structured.
Deloitte said it also welcomed the court outcome. "The administrators have always been focused on the task at hand, which is to restructure the business and provide a strong foundation for its future under new ownership, a Deloitte spokesperson said.
"Work continues on preparing the report to creditors for distribution on 25 August, ahead of the second meeting on 4 September."
--Additional reporting by The Australian