Private equity: Virgin Australia and the brutal break fee
Euromoney, is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
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.








Gift this article