The law firms who are key players in the Virgin Australia fallout

By Tony Zhang|30 April 2020
Virgin Australia

Following news of the administration of Virgin Australia, a host of law firms are closely working with major corporations and governments to see who can save the nation’s second-largest airline.

Deloitte was appointed by the airline last week after the Virgin board agreed to go into voluntary administration in the hope of restructuring.

Documents lodged in the Federal Court revealed Virgin owed $6.84 billion to up to 12,000 creditors, including banks, lessors, airports, employees and bondholders, with the fallout causing many law firms to be involved.

The main legal representative who is acting for Virgin Australia is Clayton Utz, which the airline solidified their relationship as “its long-term legal advisers.”

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Lawyers Weekly can confirm Clayton Utz partner Timothy Sackar is advising the administrators and Virgin along with barristers Dr Ruth Higgins SC and Daniel Krochmalik.

With nearly 20 cashed-up buyers circling the fallen airline, one of the lead buyers, BGH Capital is among the major investors to be in the front line. Lawyers Weekly understands they have contracted Melbourne law firm Arnold Bloch Leibler to advise them on the transaction.

BGH Capital, a private equity firm with a $2.6 billion fund, and deep-pocketed investors and dealmakers, was involved in an attempted takeover for Qantas Airways in 2006.

Then there are Virgin’s bondholders, who rank behind secured creditors at the airline, who have hired a financial adviser to fight for their interests in the group’s administration.

The bondholders have set up a committee, which is believed to speak for more than 50 per cent of the bonds on issue.

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It is known that the committee has appointed local firm Faraday and is taking its legal advice from Corrs Chambers Westgarth.

Lawyers Weekly also understands that international law firm Hogan Lovells is holding discussions with some bondholders of distressed airline carrier Virgin Australia, ahead of the first creditors meeting.

Hogan Lovells has confirmed they are not formally engaged, but is having discussions with bondholders on their positions, according to Scott Harris, a Sydney-based partner at the firm. 

“The various bonds have been broadly issued and significant numbers of retail investors are thought to hold bonds in relatively small amounts,” Mr Harris said.

Outside of employees and bondholders, Virgin is also facing a potential stoush with companies that provide financing for it to lease its planes, with one financier, Pembroke Aircraft Leasing, already raising concerns about the administrators. 

The law firm representing Pembroke is King & Wood Mallesons.

Furthermore, Lawyers Weekly understands KWM is acting for 16 different creditors and lessors to Virgin Australia following the airline’s move into voluntary administration.

The information came to light through an affidavit filed with the Federal Court of Australia. 

The affidavit also revealed that Clifford Chance has been in discussions with lessors about representing them in the proceedings. 

According to the administrator, there are about 94 aircraft leases held.

It is also understood that KWM put their concerns in writing, telling Deloitte that after 60 days, lessors would take possession of aircraft, engines, technical records and so on, if administrators did not agree “to perform all future obligations”.

There are also major issues with state governments that are currently involved in a dispute for the airline.

It comes after Australian Aviation reported a week-long tit-for-tat battle between three of the biggest states – Melbourne, Sydney and Queensland – bidding to save Virgin Australia, in exchange for the airline shifting its base of operations. 

This came after 11 aircrafts had been seized by Perth and Adelaide airports over non-payment of fees, in the vicinity of $26 million.

Queensland government and Melbourne Airport, which is owned by a bunch of infrastructure funds, have both drafted in international firm Allens for legal advice on how to best go about defending their interests.

It is understood the state government and the airport are talking to Allens individually, trying to understand from a legal standpoint what it means for them now that Virgin is in Deloitte’s hands.

The law firms who are key players in the Virgin Australia fallout
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