Virgin Australia owes nearly $7b to thousands of creditors

Virgin Australia owes thousands of creditors nearly $7 billion as fresh details of the failed airline’s finances shed light on how difficult it would have been for the carrier to strike any rescue deal.

The airline’s directors put the company into administration this week after it failed to pull off a restructure. Virgin, like airlines around the world, has shut down the vast majority of air travel as a result of COVID-19 travel restrictions.

The administrators are now working hard on finding new owners for Virgin and have said at least 10 groups are interested in being a part of the rebirth of the airline. Private equity group BGH Capital is in the race, while transport billionaire Lindsay Fox has also been mentioned as a possible bidder, along with various international interests.

The new figures were made available in court documents filed by Virgin’s administrators at Deloitte ahead of a Federal Court hearing on Friday to discuss minor elements of the administration. The report shows that administrators have identified 10,247 known creditors in total (including approximately 9020 employees).

“This is likely to change as more information becomes available. The administrators expect the total number of creditors is estimated to be over 12,000,” the documents signed by Deloitte partner and Virgin administrator Vaughan Strawbridge said.

Virgin employs about 10,000 staff and according to the court documents they are estimated to be owed approximately $450.77 million.

The breakdown also shows that Virgin’s increasingly angry bondholders who expect to be asked to take the biggest haircut will rank just behind secured lenders in terms of the value of their claims with secured lenders and secured leaseholders owed $2.28 billion and bondholders $1.98 billion.

Other financing groups providing credit for Virgin to lease aircraft are owed $1.88 billion. Trade creditors, ie people who supply services or goods to Virgin, are owed about $166.7 million while landlords are estimated to be owed $71.21 million.

The court documents also show the administrators face a growing issue with working through the company’s aircraft leases. “Reaching a determination as to the future status of the leases and identifying any further arrangements that may be relevant has been since their appointment, and will continue to be, a very significant task for the administrators,” Mr Strawbridge said.

In administration, Deloitte acts as an independent party to assess Virgin’s position and negotiate with creditors about the best outcome ffor the business. That could include finding new owners to take over the airline and keep it operating or, if that is not possible, selling its remaining assets to pay off as many creditors as possible.

Creditors – including banks, aircraft lessors, customers with credits from cancelled bookings or frequent flyer points and staff owed entitlements – may only receive cents in the dollar for what they are owed.

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