The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Private equity: Virgin Australia and the brutal break fee

The aviation industry is in for a bumpy ride.

virgin-australia-aeroplane-780.jpg



The sale of Virgin Australia to Bain Capital appears a little closer after bondholders, including Broad Peak Investment Advisers and Tor Investment Management, withdrew an alternative deal.

Bain Capital has more reason than most for hoping the deal goes through. It has agreed to pay a A$750 million ($543 million) break fee if it fails to buy the airline.

It made this eye-watering pledge, an exceptionally high break fee, “to underpin its commitment to the transaction”, Bain said in a statement to Bloomberg, which first reported the fee.

The break fee is presumably to stop Bain walking away, even if the prospects for international aviation become even worse – which they are steadily doing.

It emerged in August that Singapore Airlines had already burned through half of the S$8.8 billion capital raising it secured in June, while Qantas’s A$2 billion loss was its worst result for a century.

Private equity firms are known for long-term contrarian commitments, but aviation really is testing the limits of their tolerance. Virgin creditors will vote on the Bain takeover on September 4.








You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree