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Virgin Australia owes $6.8bn to more than 12,000 creditors, documents reveal | Business


Virgin Australia owed more than $6.8bn to more than 12,000 creditors, including employees, banks, aircraft financiers and landlords, when its board decided to appoint administrators last Monday.

Documents filed with the federal court by the administrators, partners at accounting firm Deloitte, show they are also uncertain as to whether to continue leasing some of the grounded airline’s 144-strong fleet of planes.

On Friday morning, federal court judge John Middleton gave the administrators permission to hold a meeting of creditors next Thursday by videolink.

He also allowed the administrators an extra month to decide how to deal with its 94 different aircraft leases before they become personally liable for almost $2bn owed under the contracts.

Administrator Vaughan Strawbridge has previously said Deloitte hopes to quickly sell Virgin Australia in one piece. An expression of interest campaign lasting three weeks started on Tuesday.

Virgin chief executive Paul Scurrah, who remains in his job during the administration, said the board’s decision to place the company in administration came after the federal government knocked back a final plea for $200m in assistance – far less than a loan of $1.4bn the airline initially requested.

In an affidavit filed with the court, Strawbridge said the airline’s business was hit hard by a series of travel restrictions imposed by state and federal governments last month in response to the Covid-19 pandemic.

He said the administrators had so far identified about 10,200 creditors, including about 9,000 employees who are owed about $450m.

“The administrators expect that the total number of creditors is estimated to be over 12,000,” he said.

He said 26 secured corporate debt and aircraft finance lenders were owed about $2.28bn.

More than 1,000 trade creditors are owed $166m and a group of 81 landlords are owed $71m.

About 50 companies from which the airline has leased 94 planes are owed $1.88bn.

Unsecured bondholders, who have the most vulnerable position, are owed close to $2bn, but Strawbridge did not say how many there were.

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Correspondence filed with the court shows some aircraft leasing companies raised concerns that they would not be paid for the use of a handful of planes that remain in service.

Normally, the administrators would be personally responsible for the leases from next Tuesday.

However, Middleton’s order means this personal liability begins instead on 26 May.

“At present, the administrators have been unable (and will, before 28 April 2020, not have been able) to form a view as to whether it is necessary or desirable, in the interests of preserving the value of the business, to exercise rights over the leases,” Strawbridge said in his affidavit.

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