Court Documents Show $6.8bn Owed By Virgin Australia To More Than 12,000 Creditors

At the time the board of Virgin Australia decided to appoint administrators last Monday, the airline owed more than $6.8bn to more than 12,000 creditors which included its employees, banks, aircraft financiers and landlords, according to a report published by The Guardian.

The company is also unsure about whether to continue leasing some of the grounded airline’s 144-strong fleet of planes, showed documents that were filed with the federal court by the administrators, partners at accounting firm Deloitte.

Permission to the administrators to hold a meeting of creditors next Thursday by videolink was granted by federal court judge John Middleton on Friday morning. The court also gave the administrators an additional month to find out what to do about the 94 different aircraft leases prior to them becoming personally liable for almost $2bn owed under the contracts.

Deloitte hopes to quickly sell Virgin Australia in one piece, administrator Vaughan Strawbridge has previously said. the administrators have called for expression of interest from interested parties starting Thursday.

After the Australian federal government turned down a final plea for $200m in assistance – which was in fact far lower than the assistance of $1.4bn in loans that the airline initially requested, the board of the company decided to take the decision to place the company under administration, said Virgin chief executive Paul Scurrah, who still retains his position during the administration.

A series of travel restrictions imposed by state and federal governments in Australia last month as a measure to curb the spread of the coronavirusm had hit the airline and its business very hard,   Strawbridge said in an affidavit filed with the court. So far about 10,200 creditors, including about 9,000 employees who are owed about $450m, had been identified by the administrators, he said.

“The administrators expect that the total number of creditors is estimated to be over 12,000,” he said.

About $2.28bn is owed by the airline to 26 secured corporate debt and aircraft finance lenders, he said. Further, $166m is owed by the airline to more than 1,000 trade creditors while $71m is owed to a group of 81 landlords. And $1.88bn is owed to about 50 companies against the lease of 94 planes form the companies.

Close to $2bn is owed to unsecured bondholders, who have the most vulnerable position,. However the number of such bondholders was not disclosed by Strawbridge.

Concerns that payment for the use of a handful of planes that remain in service would not be made to them, have been raised by some aircraft leasing companies, shows correspondence filed with the court.

Normally, the administrators would be personally responsible for the leases from next Tuesday. However, the court’s order now sets that personal liability period from 26 May.

“At present, the administrators have been unable (and will, before 28 April 2020, not have been able) to form a view as to whether it is necessary or desirable, in the interests of preserving the value of the business, to exercise rights over the leases,” Strawbridge said in his affidavit.

(Adapted from TheGuardian.com)

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