Virgin Australia (VA, Brisbane International) has downplayed the potential financial impact of a Federal Court class action filed against the airline and its former chief executive and chairman by investors claiming they were misled about the airline's financial position in a 2019 prospectus.
“Virgin Australia does not expect any financial consequence to the company from these proceedings,” a spokesperson said in a short media statement shared with ch-aviation.
"Virgin Australia can confirm it has been served legal proceedings filed in the Federal Court of Australia, in which [former Chairperson] Elizabeth Bryan and [former Chief Executive Officer] Paul Scurrah are also named as defendants. The proceedings relate to matters that occurred prior to the company entering and subsequently exiting voluntary administration as a privately owned company with new owners and a new management team," the spokesperson said.
According to Australian news reports, the class action is funded by Matheson Property Group and led by Corrs Chambers Westgarth, a Melbourne-based law firm, which was not immediately available for comment.
In the lawsuit, former Virgin Australia bondholders accuse Virgin Australia of hyping up its finances when promoting its November 2019 prospectus to buy out a minority shareholder of its Velocity frequent flyer loyalty programme, reports Australian Associated Press.
The acquisition was estimated to cost AUD700 million Australian dollars (USD491 million). Virgin Australia offered around AUD325 million (USD228 million) in unsecured notes to Australian investors and a further USD425 million in unsecured notes to US investors. These notes were said to provide buyers with an 8% yearly interest rate.
The investors claim Virgin Australia omitted crucial financial information and made misleading remarks when publicising its 2019 prospectus. They say they would not have acquired the notes if they had known the airline's true financial position and now seek monetary compensation for their losses.
Following the acquisition in December 2019, Virgin Australia entered administration in April 2020 and was eventually sold to Bain Capital in September that year.
