Bain Capital agrees deal over Virgin Australia administrator to buy struggling airline

Virgin Atlantic rival Qantas said it was also facing job cuts. (Reuters)
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Updated 27 June 2020

Bain Capital agrees deal over Virgin Australia administrator to buy struggling airline

  • The proposal will be put forward to the airline’s creditors for their approval

SYDNEY: US private equity group Bain Capital said on Friday it has agreed with the administrator of Virgin Australia Holdings to buy Australia’s second-biggest airline for an undisclosed sum, banking on an aviation industry recovery.

Bain’s bid was chosen over a rival offer from Cyrus Capital Partners and a recaptalization proposal put forward by Virgin Australia bondholders, administrator Deloitte said.

Deloitte said it was not yet possible to estimate the return to creditors and did not expect any return to shareholders. An update on the return will be provided ahead of a creditor’s meeting in August, it said.

Many contracts with suppliers and aircraft lessors must be renegotiated before the return to creditors can be finalized, a source with knowledge of the matter told Reuters on condition of anonymity.

The deal will need to be approved by 50 percent of creditors by value and 50 percent by number to be finalized.

A spokesman for the 6,000 unsecured bondholders owed A$2 billion ($1.4 billion) said that despite Deloitte’s selection of Bain, they would continue to push for genuine consideration of their rival debt-to-equity swap proposal.

Bain is using private equity as well as its distressed and special situation funds for the deal, according to Deloitte, which said the deal provided a “significant” injection of capital into the airline.

HIGHLIGHTS

  • Not yet possible to estimate return to creditors.
  • Offer picked over rival one from Cyrus.
  • Deal will be voted on by creditors in August.

The Australian, the newspaper which carried the report, said Bain would inject A$600 million of cash up front, A$600 million to cover travel credits held by customers and A$450 million to cover employee entitlements, without saying where it got the information.

Deloitte and Bain declined to comment.

Bain plans to strengthen Virgin’s regional services and ensure the airline offers good value for leisure customers while continuing to serve business travelers, Mike Murphy, an Australia-based managing director at Bain, said in a statement.

Virgin Australia entered administration in April owing nearly A$7 billion to creditors, but is viewed as an attractive investment given the Australian domestic aviation market duopoly it shares with larger rival Qantas Airways.

Cyrus on Friday morning said it had pulled out of the bidding, citing Deloitte’s unwillingness to engage in meaningful talks.

The Bain proposal supports Virgin Australia’s current management team, led by Chief Executive Paul Scurrah, and its improvement plan for the airline, Deloitte said in a statement.

Virgin Australia has about 9,000 employees and Bain plans to keep 5,000 to 6,000 and operate 60 to 70 of its Boeing Co. 737 planes, Murphy told The Australian Financial Review on Friday, adding the airline could break even by February. 

Qantas on Thursday said it would cut more than 20 percent of its 29,000-strong workforce because of the bleak international travel outlook associated with the coronavirus outbreak.

Virgin Australia has a smaller international business than Qantas and is more exposed to the domestic market.


INTERVIEW: Abeer Al-Fouti sees Alwaleed delivering global response to COVID-19 pandemic

Updated 11 July 2020

INTERVIEW: Abeer Al-Fouti sees Alwaleed delivering global response to COVID-19 pandemic

  • Abeer Al-Fouti explains how the philanthropic world has come together in the COVID-19 era

DUBAI: Charity begins at home, they say, but in the era of the world pandemic such a domestic-focused approach is neither desirable nor effective.

That is why several global philanthropic organisations, and big name donors, have come to the fore in the course of the COVID-19 crisis to offer financial, practical and logistics support to those people in the world whose governments do not have the means to extend assistance to their entire population.

Perhaps the best known is Bill Gates, the American entrepreneur who has pledged to give away his entire multi-billion dollar fortune to beat the virus. Other eminent entrepreneurs have also given billions in the attempt to find an elusive vaccine or effective treatment.

But Saudi Arabia has its own famous philanthropist in the shape of Prince Alwaleed bin Talal, the Kingdom Holding magnate, who has for many years been dispensing charity via his organization Alwaleed Philanthropies.

Abeer Al-Fouti runs the global side of that enterprise and is convinced that only a global approach will work in the face of the biggest health challenge for nearly a century.

“The simple message is that actually COVID-19, despite all the challenges, whether economic, or emotional or health or luck, has one important lesson that we have all learned, or should learn: That we are one world, we are one.

“If you think selfishly, it is going to come back and haunt you anyway. So this is the time when we all need to come together and think we are one. Otherwise, we are all going to go down together,” she told Arab News.


As one of the ambitious young women coming to prominence as part of the Vision 2030 strategy of female empowerment, she obviously takes great pride in her work.

“This year we’re celebrating 40 years of our existence. If I can summarize it in numbers, we’ve been working for four decades in six continents, serving 200 countries with 355 global partners. We’ve finished 1,000 projects and spent over $4 billion, and we reached one billion beneficiaries across the world. That’s our latest update. And it’s all run by 10 Saudi females from Riyadh,” she said.

Alwaleed Philanthropies plays a major role in charitable giving within the Kingdom, supporting organizations and individuals across the spectrum of community development, health, education and empowerment. But Al-Fouti’s responsibilities are more global.

“I believe philanthropy pays a major role in filling the gap, with a regional platform bringing the government and private sector together, and focusing on those who maybe the system does not serve or does not cover. This is why His Royal Highness called us together, to do our research and then to explain who we think we should support,” she said.


“We decided to focus on those that were most vulnerable in the Arab world, in the Middle East and Africa,” she said.

Fighting the pandemic has been the main focus for the organization since the virus broke on the world earlier this year. In April, Alwaleed Philanthropies gave an extra $20 million to provide medical and economic help to poorer countries during the pandemic, bringing its total COVID-19 support to $30 million, on top of its usual budget.

“In these times of unprecedented crisis it is more important now than ever that we pull our resources together in the battle against COVID-19. With many developed nations struggling to cope with the COVID-19 pandemic, we must spare a thought for the developing countries of Africa and the less fortunate countries in the Middle East,” Prince Alwaleed said then.

“I’m sure you know it’s in the DNA of our culture and our religion — giving and charity. Everyone is required to give as part of the culture,’ Al-Fouti added. Alwaleed’s work runs alongside an equally generous program of charitable initiatives funded by the government of Saudi Arabia for projects both within the Kingdom itself and the rest of the world.


Maintaining the international partnerships that have been cultivated over the decades is a vital part of her work. The Gates Foundation, Gavi, the vaccination organisation, the World Health Organization and the United Nations are important allies in the global sphere.

“We have criteria for selection, and mainly we want to work with partners that are credible and share common values, and those which have long-term impact, in addition to other criteria. We have a detailed list of criteria and we tick those which have compatibility, reliability and credibility. We have to ensure that the money we give will reach those in need,” she said.

Another important ally is the Islamic Educational, Scientific and Cultural Organization, ISESCO, which has partnered with Alwaleed on many regional projects.

“We support initiatives in 200 countries, regardless of gender, race or religion — as long as they have shared values,” she explained.

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BIO

Born: Alkhobar, Saudi Arabia

Education: Bachelor’s and master’s degrees in health and hospital administration, King Saud University

Career: Various roles in government and private sector in human development, management and public relations

- CEO Al-Khair

- Partner, RVCC property development

- Co-founder, Smile Productions

- Executive manager, Global initiatives, Alwaleed Philanthropies

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Those initiatives fall into four main categories. Community development involves work on essential infrastructure — housing projects, employment initiatives and educational opportunities to help achieve the UN’s sustainable development goals.

Second comes empowerment initiatives for women and young people. In partnership with international institutions such as the UN, Alwaleed works to enhance opportunities for underprivileged women across the Middle East and Africa and to advance the interests of the big youthful demographic in the region. “We want people to become self-sufficient and empowered, Al-Fouti said.

For example, Alwaleed was a leading partner in the Turquoise Mountain project in Afghanistan, which sought to revive traditional craft industries in the war-ravaged country, providing employment for thousands of women and young people and helping to restore traditional buildings for use as medical and educational facilities.

Next comes disaster relief, again often in conjunction with UN organizations. Alwaleed played an active role in helping Albania to recover from the recent earthquake there, for example.

Finally, there is what Al-Fouti regards as her “favourite” work — the initiatives to “bridge cultures” through educational and cultural activities in several countries. Alwaleed is involved in projects in the Louvre in Paris and with Berlin Museum to explain Islamic culture to Europeans.

“We believe the best way for people to understand each other is through art and culture. We’re planning to work this year with all our educational centres, and with the Louvre and Berlin, to see how we can revisit this strategy and see how we can have more impactful projects in terms of bringing people together,” she said.

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READ MORE: Alwaleed Philanthropies, ICESCO MoU to help 10 African countries

Prince Alwaleed pledges $30m to fight pandemic

How Louvre-Saudi Islamic cultural ties are promoting peace and tolerance

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But the reaction to the pandemic has understandably taken up a lot of the organization’s time this year.

“We decide to get in and minimize or control the spread of the virus by strengthening local capabilities, for example through or work with ISESCO. In Africa they asked us to provide them with masks and with alcohol cleaning products. We decided that we were also going to go in and create or scale up factories, get jobs going and make the initiative available and sustainable, and this is what we are doing,” Al-Fouti said.

Through the collaboration with Gavi, Alwaleed has been able to bring medical relief to remote areas in the region. One of the repercussions of the pandemic has been that other essential medical projects, such as polio vaccination or routine immunization for children, have been scaled back drastically, partly because of travel restrictions but also because of the pressure on funds.

“In some places when people were being asked to stay at home, some didn’t have a home to go to. They were asked to wash their hands and they didn’t have water. That’s why we invested in areas where we thought there is a gap,” Al-Fouti explained.

So, those 10 women in Riyadh have the support and back-up of hundreds of partners around the world, with a global perspective in the midst of the COVID-19 crisis.

“We have partners and embedded collaborative relationships that we consider to be an extension of our team. So we are not alone. There is a saying ‘work smart, not hard.’ But we work hard as well. In fact, we really do work hard,” she said.