Cyrus Capital is walking away from the contest to take over Virgin Australia, in a dramatic move which sets up competitor Bain Capital to take control of the airline.
In a statement issued on Friday morning, founder and chief investment officer of the New York-based investment and private equity firm, Stephen Freidheim, said "I am disappointed that it has become necessary to withdraw our offer."
The statement cited "a lack of engagement by the administrator" Deloitte as the reason for the shock decision.
"Cyrus presented to the administrators of Virgin Australia Holdings an offer to acquire the airline, its regional business and the frequent flyer program Velocity, in accordance with the administrators’ procedures," the statement said.
"However, since then, the administrators have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer."
"On the morning of 25 June 2020, Cyrus submitted a further unsolicited package of value improvements and other compelling measures to increase the value of the transaction, improve the return to unsecured bondholders and deliver more certainty for the administrators. This too received no response other than an acknowledgement of receipt."
"Despite the material improvements put forward, the administrators have still not engaged with Cyrus on its offer."
However, Freidheim left the door open for Cyrus to return to the table, saying the firm "would be willing to reinstate our offer if the administrators agree to re-engage in good faith, productive discussions with a view to concluding a transaction that will benefit all key stakeholders – employees, customers, Velocity members and bondholders."
Cyrus had been firming up as the preferred bidder of Virgin Australia's workforce and unions, although Bain boasted that it had substantially deeper pockets and could fully fund the Virgin Australia takeover without relying on other backers to form a consortium.
Cyrus, like Bain, wanted to reposition Virgin Australia as a mid-market airline with a smaller and simplified fleet, flying mainly domestic routes except for short-range trips such as to New Zealand, and cited its own involvement in the launch of Virgin America as a model for Virgin Australia 2.0.
Deloitte has previously said it would nominate its preferred bidder by June 30, although the process has been complicated by an eleventh-hour proposal by Virgin Australia's 6,000 bondholders, who are owed some $2 billion and want to see that debt converted to equity, and are offering an additional $1 billion to recapitalise the airline.