Virgin's administrators put brakes on plane repossessions

25 May 2020, 06:34 by Sarah Danckert

The administrators to stricken airline Virgin Australia have chalked up a minor victory after striking a deal to stop the carrier's fleet being repossessed by angry financiers mid-way through the group's sale process.

The airline's administrators Deloitte said in court documents filed on Monday in the Federal Court they had reached an agreement with the groups that provide aircraft leasing finance to Virgin.

https://static.ffx.io/images/$zoom_0.236%2C$multiply_1.5109%2C$ratio_1.776846%2C$width_1059%2C$x_0%2C$y_92/t_crop_custom/q_62%2Cf_auto/55622e2ec338014d4864c41823217231b6df1fe5 — Virgin – under immense pressure as the COVID-19 pandemic took the axe to travel demand and tourism more broadly – tipped into administration in late April.Credit: AP

Virgin entered administration in late April after becoming unable to service its large debt pile in the wake of the shutdown of most aviation travel due to the coronavirus pandemic. It owes its creditors, including 10,000 staff, a total of $7 billion.

Virgin's aircraft lessors are collectively owed $3.7 billion by the airline, according to legal letters filed with the Federal Court. The court documents show the cost of repaying the leases is $40 million a month in administration, while the gross revenue of the operating fleet has shrunk to $25 million a month due to coronavirus restrictions.

Some groups had raised the prospect early in the administration process in April of repossessing the planes they had provided finance for Virgin to lease amid concerns their jets were still being used by the airline but they were not being paid by the cash-strapped carrier.

A mass repossession of Virgin's fleet could have seriously hampered the efforts of Deloitte to sell Virgin Australia to a new buyer.

The agreement between the lessors and the administrators means it is unlikely any planes will be repossessed before August 31, which is when the administrators expect to have largely completed the sale process.

Administrators have shortlisted four bidders for Virgin Australia. This list includes three groups headquartered in the US - Bain Capital, Indigo Partners, Cyrus Capital Partners - and local group BGH Capital.

The short-listed bidders are expected to make binding offers by June 12 and creditors are expected to vote on whether to approve an offer by the final bidder in August.