“It was drinking from a firehose for 3 months”: from its first passenger with COVID-19 in January, through to the appointment of the voluntary administrators on 20 April, 2020 was a massive rollercoaster ride for Virgin.
The sale process undertaken by the voluntary administrators unfolded at a frantic pace throughout May and June 2020. Five competing bids eventually culminated in a deal signed in June 2020 that involved Bain Capital taking full control of Virgin Australia by 17 November 2020.
The panel, representing the wider team critical to this success story, focused on the efforts required from key stakeholders – Bain Capital, the voluntary administrators and the Virgin team – to complete the deal with Bain Capital. The legendary Virgin culture was noted as a critical element.
Some of the notable challenges discussed by the panel included:
- Deal structure – a key factor in this success was the sale structure. Under that structure, a binding sale agreement to Bain, with funding, was entered prior to the second meeting of creditors. This was coupled with two track options to transfer the business, either by way of a Deed of Company Arrangement with section 444GA authorisation to transfer the listed company’s shares or, alternatively, an asset sale if the DOCA was not approved by creditors.
- Communication – successful communication channels between the stakeholders were critical. Sixteen separate work streams and departments were identified by Bain Capital, with daily update calls from representatives of all those departments.
- Adjusting to the pandemic – while State border closures obviously hampered Virgin’s ability to fly domestic routes, it also made it incredibly difficult for the key stakeholders to travel to ensure the success of the sale process. Novel approaches were needed to manage the usual processes of a voluntary administration under those circumstances.
- The renegotiation of commercial contracts – Virgin’s modestly sized in-house legal team assisted with the review and renegotiation of 1,400 contracts deemed crucial to the future of the airline, within the structure of the Deed of Company Arrangement. Some insolvency training, coupled with the assistance of Virgin’s external advisers, Bain Capital and Bain Capital’s external advisers, resulted in the successful completion of this mammoth task.
The panel consisted of Josh Hartz (Director, Bain Capital), Susan Schneider (Head of Legal, Compliance and Risk, Virgin), and John Greig (Partner, Deloitte and one of the Virgin Administrators), moderated by Nikki Smythe (Herbert Smith Freehills).