Virgin Australia bondholders in talks with Hogan Lovells

International law firm Hogan Lovells is holding discussions with some bondholders of distressed airline carrier Virgin Australia, ahead of a first creditors meeting set for Thursday.

Virgin Australia became Asia’s first airline to fall amid the coronavirus pandemic when it was placed under voluntary administration last week. With total debt of about A$6.84 billion ($4.4 billion) and more than 10,000 creditors, it’s one of Australia’s most high-profile debt restructurings. The carrier, whose shareholders include Richard Branson’s Virgin Group, Singapore Airlines Ltd. and HNA Group Co., was denied a bailout by the Australian government.

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

A spokesman for Virgin Australia directed all questions about the airline’s restructuring to administrator Deloitte. A representative for Deloitte said that bondholders are “a key creditor group” and all creditors have been advised of the Thursday meeting and are receiving updates. He added that he has “no doubt bondholders will be represented at the meeting.”

Virgin Australia owes unsecured bondholders about A$1.99 billion, and those investors will be competing with employees, secured lenders, aircraft lessors and suppliers for money. Suitors for the company are said to have kicked off due diligence.

The recovery value for Virgin Australia’s senior unsecured debt—which includes bondholders—could be about 20% to 25% in a restructuring or recapitalization, according to an estimate by Nomura Holdings Inc. Under a liquidation, it estimates the recovery would be around 10%.

“The various bonds have been broadly issued and significant numbers of retail investors are thought to hold bonds in relatively small amounts,” said Harris at Hogan Lovells. “This could impact on efforts to gather together sufficient holders in order to be in a position to protect their interests.”