Bain to pay $744m break fee if Virgin deal fails

SYDNEY • Bain Capital has agreed to pay A$750 million (S$744 million) should it fail to buy Virgin Australia Holdings, an unusually high break fee that helped win over the collapsed airline's administrator.

The US private equity firm made the pledge "to underpin its commitment to the transaction", it said in a statement. Administrator Deloitte agreed to sell the struggling airline to Bain in June, though the deal's terms were not made public.

The airline is almost entirely owned by four foreign aviation groups - Singapore Airlines, Etihad Airways, HNA Group and Nanshan Group - that each hold 20 per cent stakes.

While Deloitte has not disclosed the potential fee, it told Virgin's creditors last week that Bain had provided a "substantial financial guarantee to secure transaction certainty".

The break fee is designed to lock in the buyout firm.

Virgin's creditors are due to vote on Bain's takeover on Sept 4. The potential penalty is a "strong impetus" for the firm to complete the deal "irrespective of operational challenges caused by Covid-19", Deloitte said.

The guarantee means all Virgin Australia employee entitlements will be paid even if the deal fails, Deloitte told creditors in its Aug 14 circular. Those entitlements are worth A$450 million. Bain said its guarantee, and A$125 million of interim funding for the airline, shows its "determination to secure the long-term future success of Virgin Australia".

BLOOMBERG