Please ensure Javascript is enabled for purposes of website accessibility

Bain Capital to Buy Virgin Australia Out of Bankruptcy

By Rich Smith – Jun 26, 2020 at 11:38AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shareholders, including Sir Richard Branson's Virgin Group, will probably be wiped out.

Virgin Australia, the discount airline that's owned in part (but not in whole) by Sir Richard Branson's privately held Virgin Group, filed for bankruptcy in April after being denied a $964 million bailout loan from the Australian government. Two months later, bankruptcy proceedings are wrapping up and ... we have a winner.  

Bain Capital won the auction to acquire Virgin Australia, announced bankruptcy administrator Deloitte Thursday night. The U.S.-based private equity firm "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,"  

Red bankrupt stamp

Image source: Getty Images.

Whatever the merits of its offer, Bain's victory was essentially foreordained because the way things shook out -- it ended up being the only bidder for bankrupt Virgin Australia. Its final rival, New York-based hedge fund Cyrus Capital Partners, dropped out of the proceedings Thursday.

Bain's final offer has not been revealed. Whatever it was, however, it's unlikely that the "bid" will result in actual money being paid to Virgin Australia's current shareholders. The airline is AU$7 billion ($4.8 billion) in debt, and it's uncertain that all of its debt holders will get their money back. Shareholders get paid after debt holders in bankruptcy proceedings, so in all likelihood, before the trustees get that far down the list, the money will be gone -- and shareholders will be wiped out entirely.

That being said, Bain has promised to ante up enough money after taking ownership to recapitalize Virgin Australia sufficiently to at least enable the airline to make it through the end of the current recession.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.