Bain’s revival of Virgin Australia faces growing legal obstacle

Bain Capital’s resurrection of collapsed airline Virgin Australia Holdings faces mounting legal opposition as bondholders rally to derail the takeover and salvage some of their debt. What started weeks ago as a long-shot challenge to Bain’s deal from two little-known investors in Asia has attracted the biggest names in finance. Now UBS Group, Deutsche Bank and other creditors holding A$800m ($570m) of Virgin Australia bonds support a plan to muscle out Bain and rescue the airline themselves, according to court filings. Virgin Australia crumbled in April owing A$6.8b, and administrators at Deloitte fast-tracked a sale to Bain before the airline’s cash ran out. The private equity firm plans to cut a third of the workforce and scale back the fleet, but it hasn’t said how much creditors will receive. With indebted airlines on the brink of collapse worldwide, the standoff in Australia shows that recoveries in one of the pandemic’s hardest-hit industries risk delay or even failure once creditors start picking through the remains. On Monday, Australia’s federal court will hear the bondholder group’s request to have Virgin Australia’s creditors vote on any offer, not just Bain’s. They also want more information on the airline from Deloitte to help finalize a rescue plan. The bondholders are proposing swapping their debt for equity and injecting fresh funds into a reborn airline. In the best scenario, they’d claw back two-thirds of their original investment. <br/>