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A sudden and unexpected end to the buyout process has been announced with Bain Capital selected as the preferred party to acquire Virgin Australia. We have seen the two shortlisted candidates going head to head for weeks which is now finally over.

The reason behind New York-based firm Cyrus Capital Partners withdrawing from the bidding process due to Virgin Australia's Administrators lacked engagement. Deloitte, the airline's administrators, announced today in a statement that Bain Capital has acquired Australia’s second airline with Vaughan Strawbridge saying “Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia’s second airline, thousands of employees and their families, and ensure Australia continues to enjoy the benefits of a competitive aviation sector. “I would also like to thank the broad range of bidders who participated in this competitive process, including Cyrus Capital Partners, and who worked so hard with us throughout this process.”

In a statement from Cyrus’s founder and Chief Investment Officer Stephen Freidheim said that Deloitte was not returning phone calls. In the statement, he said “On the morning of 22 June 2020, Cyrus presented to the administrators of Virgin Australia Holdings an offer to acquire the airline, its regional business, and the frequent flyer program Velocity, in accordance with the administrators’ procedures. “However, since then, the administrators have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer. “As a result, Cyrus has withdrawn its offer today, 26 June 2020.” This was a significant change from the company, especially when they seemed so upbeat and optimistic when briefing the airline's shareholders. But could there be more to what meets the eye, we decided to investigate a bit deeper into what happened.

Last week some disgruntled bondholders approached Deloitte even though they’re not part of the formal bidding process Australia Consumer Law allows them to make an offer. The airline’s bondholders are owed close to $1.4 billion, and since they were unsecured creditors, their bonds are 10 cents in the dollar. On the 24th of June, the bondholder representative Faraday and Partners met with Deloitte and proposed injection of $637 million and exchange debt into equity which would keep the airline public and most importantly, flying. A spokesperson for the bondholders said Our plan offers a sustainable capital structure underpinned by public ownership to provide certainty and support the strong operating plan for the airline,”. There was an attempt to counter this offer by Cyrus, but ultimately that failed.

We reached out to Deloitte for a comment, and we received a response from their Corporate Affairs & Communications department. The Administrators' spokesperson stated in an email to us “The Administrators last week thanked Cyrus Capital Partners for their strong engagement throughout this process. They fully understand that the Cyrus team is disappointed in the outcome, but believe they, and their advisors, engaged with Cyrus and its advisors strongly, including providing the feedback that allowed the submission of a revised bid as recently as last Thursday.” They also said that Bain Capital had won the bid, but they do not fully control the company since they need to have another meeting with creditors which is due to take place sometime in August. In their transaction, they remain committed to maintaining thousands of jobs and honour entitlements and providing a significant capital injection.

Joint Administrator Vaughan Strawbridge said “Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia’s second airline, thousands of employees and their families and ensure Australia continues to enjoy the benefits of a competitive aviation sector.” This was something that the public was concerned about since Virgin Australia is the only thing stopping the Australia aviation market from becoming a monopoly since Qantas operates JetStar. Other airlines do not pertain to the same market share.

We want to thank Deloitte for their involvement in this article, and we appreciate them taking the time to respond to our Request for Comment. We understand their commitment to ensuring that Virgin Australia Holdings remains alive and well.