Collapsed Virgin Australia Owes $4.4 Billion to Creditors, Seeks Three-Month Payment Waiver

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Virgin Australia Holdings Ltd owes A$6.9 billion ($4.39 billion) to more than 10,000 creditors based on an initial review and will seek a three-month payment waiver from aircraft lessors, its administrators said.

Virgin said this week it succumbed to third-party led restructuring that could lead to a sale, turning Australia’s second-biggest airline into the Asia-Pacific’s biggest victim of the coronavirus crisis.

The figure owed to creditors includes about A$2.3 billion of secured debt, A$2 billion of unsecured bonds, A$1.9 billion of aircraft leases, A$450 million owed to employees, A$167 million to trade creditors and A$71 million to landlords, according to an affidavit from administrator Vaughan Strawbridge.

The bankrupt airline’s administrators are liable to pay leases on its aircraft starting April 28, because they will not inform lessors whether they would renege on leases within five business days, as required by law, the documents, posted on the website of Strawbridge’s firm Deloitte, showed.

The Deloitte administrators are seeking court orders for an extension of up to four weeks from their appointment to decide if leased planes were required for continuing operations of the business, they said in a letter to lessors on the website.

“Next week we will be wanting to engage with you to firm up on interim arrangements with the administrators to support the process being followed to achieve a recapitalisation and sale, which will include a request for a three-month waiver of rent and other financial payment obligations,” they said.

A document released by the Federal Court of Australia showed law firm King & Woods Malleson (KWM) said it was representing 17 aircraft lessors and financiers.

These include Aercap Holdings NV (AER.N), Bank of China Ltd (601988.SS), SMBC Aviation Capital, ORIX Aviation, GECAS, Dubai Aerospace Enterprise, Bank of America Corp (BAC.N) and BNP Paribas SA (BNPP.PA).

The lessors with the biggest financial exposure to Virgin include Goshawk, Aviation PLC (AVAP.L), Aercap, ORIX and SMBC, each with an estimated monthly income of at least $1 million from the airline, aviation data provider Cirium says.

In a letter on Friday, KWM said its clients wanted to work constructively with the administrators, but required them to pay for regular maintenance and insurance for the planes and report weekly on the use of aircraft.