Why Virgin’s deal has run into trouble
Oh dear. The take-off of Virgin 2.0 has hit some turbulence. But interestingly, it's not the new pilot - the vulture investor group led by Bain - that might be jolted.
If it turns out that there is a price to be paid, it will be paid by all the unsecured creditors - including those unhappy bondholders - who thought they had signed off on a deal to get 9-13c in the dollar back.
Or paid, perhaps, by the administrators Deloitte, who equally thought they were now on a flight path out of the Virgin 1.0 mess with a multi-million fee free and clear.
The relaunch of Virgin 2.0 is all built on halving the size of the fleet and basically giving the leased aircraft and parts back to their investor-owners.
Last week, US bank Wells Fargo won an Australian court decision to get four engines back. The administrators Deloitte say they are cool with that - after all they want to send them back.
But the court also ruled that the administrators had to bear the costs of returning them.
That's neither surprising nor unreasonable - after all that's what the leases stipulated.
Now Deloitte has gone back to court to get that cost ruling revoked. Its action is also not exactly surprising.
This is specifically only about four engines and a cost of perhaps $1m. But, according to our sister paper The Australian, the administrators/Virgin want to return more than 60 aircraft and more than a dozen engines.
That could add up to a very big bill - and who would pay?
Deloitte says the creditors would pay. Clearly Bain is not of a mind to pick up the bill.
But gee, if that came to pass, I smell 'class action' from somewhat already slightly pissed - sorry, poised - creditors.
Originally published as Why Virgin's deal has run into trouble