Deloitte's call for Virgin emergency cash rejected as liquidity fears rise

The federal government has rejected at least one direct plea from Virgin Australia's administrator Deloitte for emergency funding to keep the airline alive, heightening concerns among bidders and unions that Virgin might fall into liquidation before new owners are installed.

Administrators from Deloitte will spend the weekend weighing up second-round bids for Virgin from four shortlisted bidders, said to be worth around $3.5 billion to $4 billion, along with an 11th hour pitch from Canadian asset manager Brookfield, which wants to re-enter the race after earlier dropping out of the sale process.

Private equity firm Bain Capital, Melbourne outfit BGH Capital, American budget airline owner Indigo Partners and the Richard Branson linked firm Cyrus Capital are in the running, with final bids due on June 12 and a creditors' vote on any proposed rescue deal scheduled for mid-August.

But there are fears among bidders and unions that the airline could go into liquidation before then as it burns through cash and most of its fleet remains grounded by COVID-19.

Virgin falling into liquidation would cause significant headaches for bidders and Deloitte because the airline would shut down and aircraft financiers could repossess Virgin's planes. It would also create greater uncertainty for Virgin's 16,000 direct and indirect workers.

Deloitte's lead administrator Vaughan Strawbridge said a fortnight ago Virgin had enough money to last until mid- to late-June but would have to find fresh funding after that, nominating bidders, banks and government as possible sources of short-term cash to see it through the six weeks after that.

Three people close to the administration, who spoke on the condition of anonymity because the process is confidential, said that Deloitte had already asked the federal government for financial support on at least one occasion but was knocked back.

A Deloitte spokesman said the administrators "continue to explore options for potential further future funding".

The Australian Financial Review has reported that the federal government rejected a separate proposal from the Queensland government this month for a joint bridge funding package.

Brookfield, which manages $US515 billion ($800 billion) of assets around the world and was the union movement's preferred bidder, walked away from the sale process last Monday over concerns about liquidity and the short time frame.

But on Friday Brookfield reaffirmed its interest in re-launching Virgin and submitted another bid to Deloitte, which can consider the proposal and present it to creditors to vote on.

However, a move to let Brookfield back into the formal sale process could be met with legal action from any one of the four other parties, which have spent millions of dollars working on their bids, a source close to one of the bidders said.

Mr Strawbridge said in a statement he intended to settle on a final short list of two preferred parties early next week.

Australian Council of Trade Unions president Michele O'Neil on Thursday wrote to the deputy prime minister and transport minister Michael McCormack urging the federal government to support Virgin's administrator in addressing the concerns about the airline's liquidity.

"There is a real risk that without clear and urgent government assistance, there will not be enough time for (the) administrator to secure a successful bidder due to the financial realities facing the company," Ms O'Neil said.

Federal treasurer Josh Frydenberg, who has appointed former Macquarie boss Nicholas Moore as an "emissary" to the administration, said the government continued to support a "market-led solution for Virgin Australia".

"We will continue to work closely with the administrator," he said.