Brookfield re-enters race for Virgin with surprise bid

Brookfield Asset Management has shaken up the bidding war for Virgin Australia as it approaches its final stage, lodging a last-minute indicative offer for the airline to administrator Deloitte after feigning a withdrawal.

After its earlier exit – prompted by concerns over Virgin's  liquidity and the tight timeline around the sale – the Toronto-based company was excluded from Deloitte's shortlist of four potential buyers a fortnight ago.

That list comprises local private equity outfit BGH Capital, American low-cost carrier investor Indigo Partners, airline investor Cyrus Capital Partners and international private equity behemoth Bain Capital.

At least three of the four submitted second-round offers, with The Australian Financial Review receiving confirmation from BGH Capital, Indigo Partners and Bain Capital.

Cyrus Capital Partners could not be reached for comment.

It remains unclear how Brookfield's 11th-hour pitch will affect the rest of the process, with the administrators – led by Deloitte partner Vaughan Strawbridge – due to reduce the bidders to just two by Monday.

"Bidding parties are confirming to us their indicative non-binding proposals to acquire the business and assets of Virgin Australia," Mr Strawbridge said in a statement. "They are a strong group of well-funded parties, and they are also parties with significant aviation experience.

"The next step in the process is to consider the proposals we receive today over the weekend, with a view to settling on a final shortlist of two preferred parties early next week."

Deloitte said on Friday it would not make further comment.

Sources close to the bidding process said Brookfield's re-emergence came after a fortnight of encouragement from the administrators, Virgin Australia management and trade unions.

Brookfield a trade union favourite

The Australian Council of Trade Unions even received a presentation from the asset manager earlier in the week, with attendees praising the lecture for its details about how a relaunched Virgin would look under Brookfield.

It was not the only presenter fronting the ACTU, with the shortlisted parties also able to outline their Virgin Mark II plans, but sources in the meeting said none were as granular as Brookfield's.

The Financial Review understands Brookfield still has anxieties over the airline's dwindling cash reserves and the small window of time allocated for a sale to get over the line.

Virgin has about $100 million in the bank, which is only enough to get it through to the end of June. It would need interim funding or access to restricted cash to carry it through to the second creditors' meeting in mid-August.

Brookfield also remains unconvinced a sale could complete by July – a deadline imposed by Deloitte – as complex negotiations required with stakeholders may not be completed by then with a crowded field of bidders.

To address the latter, a source close to the process said Brookfield's indicative offer proposed an extension to the deadline for final proposals.

The second creditors' meeting where the ultimate fate of Virgin – liquidation or sale – will be decided would remain on its current date.

Still, the answer to Virgin's cash problem is less clear.

Mr Strawbridge has said he is exploring options to access restricted cash and is in constant conversations with the federal government about Virgin's perilous financial position.

These conversations are yet to prompt the Morrison government into action. Calls from the Queensland government to prop up Virgin in the short term have also gone unanswered.

Brookfield told the ACTU it did not believe any deal could get over the line without Virgin's immediate financial future secured one way or another.

No other bidder, despite similar concerns, has yet to make government support conditional on their submission.

However, BGH Capital plans to restart Virgin with as few as 15 planes in the air before ramping up operations on the other side of COVID-19 pandemic.

Bain Capital has also blitzed media this week to outline its credentials and its plan to recapture "the Virgin Blue culture and make flying fun again".

Whichever party qualifies for the final round of bidding, Mr Strawbridge said they would have more in-depth access to the nuts and bolts of Virgin.

"This next phase ... will include further engagement with stakeholders and aircraft financiers as they seek agreements on future terms ahead of binding bids being received," he said.

"[It] will be just as intense and defined by an ongoing focus to deliver the best possible commercial outcome for creditors and see Virgin Australia restructured and out of administration as a strong and sustainable airline."