What do the following 10 institutional members of the 32-strong Virgin Australia creditor’s committee have in common?
- Association of Virgin Australia Group Pilots (VIPA)
- Australian Council of Trade Unions (ACTU)
- Australian Federation of Air Pilots (AFAP)
- Australian Licensed Aircraft Engineers (ALAEA)
- Australian Manufacturing Workers Union (AMWU)
- Australian Services Union (ASU)
- Electrical Trades Union (ETU)
- Flight Attendants Association of Australia (FAAA)
- Skywest Airlines Pilots Association (SALPA)
- Transport Workers Unions of Australia (TWU)
They are all registered trade unions or other types of employee representatives.
And how did they get such a big presence on the Virgin creditors committee?
By promising not to move against accounting giant Deloitte as the administrator, in much the same way that then-ACTU secretary Greg Combet orchestrated the ousting of PwC as the early administrators of Ansett, to be replaced by the union-friendly alternative from the newly formed KordaMentha.
There were 69 applications to join the creditors committee and as one of 37 rejected nominees, it was pretty clear yesterday that a pre-meeting deal had been done with the unions.
Deloitte administrator Vaughan Strawbridge flashed up the proposed 32 members and then declared they had a mandate. How so? Because 5282 creditors had already indicated to him that they were comfortable with the composition of the committee.
That would be all the Virgin staff, their unions and professional associations banding together to do a pre-meeting deal to dominate the committee even though the $451 million in staff entitlements have been virtually guaranteed because Virgin will be sold as a going concern.
Creditors are owed almost $7 billion in total but as Strawbridge pointed out when answering one of the many staff questions during yesterday’s creditor meeting (my four questions were all ignored), if something goes wrong for the staff there is always the government scheme to pick up unpaid entitlements, thanks to good old Stan Howard and National Textiles.
Administrator selection matters because they have great power in the ongoing management and sale of the business, answerable to the creditors, via the creditor’s committee, which is like the new board of directors.
Administrators have to make a comprehensive conflict of interest declaration before taking on a gig like this but how do you manage the conflict when the union movement and staff representatives effectively say: ‘Please give us the biggest block of votes on the creditors committee, commit to repay 100% of staff entitlements and promise no redundancies during the course of the administration’.
Well, with many millions of fees up for grabs, you play ball, don’t you?
I registered as a creditor on Sunday citing two different entitlements: unused Velocity points and a credit bank for cancelled flights.
After emailing Deloitte, they sent through the application form to join the creditors committee and that was duly lodged on Sunday as well, along with a pitch about being an independent member to keep the bastards honest.
After that, there was nothing from Deloitte until I emailed them again at 5.46pm on Wednesday afternoon asking for log-in details for yesterday’s 65 minute Microsoft Teams creditors meeting, which had more than 1000 creditors and observers on the call.
A prompt reply set out the process to join the meeting, which the press were banned from, but there were no words on the creditor committee application, let alone confirmation that it had been rejected in a pre-meeting deal with the unions.
After reading a press report in The AFR last week saying that yesterday’s meeting would be all about nominating for the committee and there would be another meeting next Tuesday to vote on the appointments, I did an approving tweet on the good governance process being used.
In any election, there should be a clear time frame for nominations and then a separate process for voting later, allowing enough time for canvassing and distribution of relevant materials on candidates.
Unions, more than any other institutions, should know and respect this.
Were the bond holders (owed almost $2 billon) or the 10 million Velocity members consulted about having 10 union and employee groups serving on the 32-strong committee? Nope.
The next biggest category is airports which have five spots. There are no Australian banks present, and the federal government has been granted observer rights, presumably for its emissary — former Macquarie Group CEO Nicholas Moore.
After the shareholders, it will be the unsecured bondholders — both in Australia and the US — who take the biggest dollar haircut from the Virgin collapse and they will be pivotal when it comes to voting on any proposed sale.
Whoever offers them the highest cents in the dollar return should win the day and that’s who Deloitte should recommend to the creditors committee.
Some of the bondholders are said to be furious about having their requests to serve on the creditors committee rejected without explanation.
So why not proceed with the original plan of having a formal vote next Tuesday?
With online meetings it doesn’t matter how many appointments are made and it would also be handy if the institutions and corporate entities doing the nominating actually named the specific people who will be representing them.
As things stand, the committee includes groups such as Northern Trust Asset Management and Airframe Leasing Pte Ltd. But who are they and exactly how much do they claim to be owed?
If it’s legal, what’s the problem?
What is with this anti-union waffle?
“Were the bond holders consulted about having 10 union and employee groups serving on the 32-strong committee?”
Do you seriously think that your voice, being owed monopoly money in the form of “Velocity points” and an unused ticket, is more important than officials who are literally elected to represent the workforce?
You think far too highly if yourself and far too little of workers mate… The whole article just reeks of right wing bs.
Excuse me fletch, but bond holders are people too. And these exact same bond holders have supported and upheld and even created the jobs in the first place. Do you have a clue how that works? Do you even know what a bond is?
The point Stephen Mayne makes is the sneaky back room deals being made prior to the official first creditors meeting. A meeting before the meeting that entrenched gravy slurping D-loittes and in bed with the unions. But you turn a blind political ideologue eye to that.
Stephen Mayne has no objection to leveraging his wealth to fund his adventures…
Why shouldn’t workers be able to leverage their labour value to ensure they get a look in?
If I understand it correctly, Bond Holders are some of the risk takers in that they’ve lent Virgn some money, the bond being the IOU slip. Given Steven Maine writes that unions(representing workers entitlements), can always go the govt for a handout as there is a precedent for it.
If I was owed money for my labour, I’d be bloody glad I wasn’t represented by the sleeping bondies legal teams. Ditto the taxpayer not having to coff up.
Yeah and the whole idea that bond holders (non-econobabble language just call them investors) “create jobs” is just ridiculous.
Consumers create demand. Demand creates work. Work pays wages.
The higher the wages the more consumer demand for *things* there is in an economy. Because the vast majority of economic activity comes from working people… we create the demand for everything. That’s why “economy class” is the default seat on a plane.
Given both wages and the profit siphoned out to investors are paid out of the same tub of cash, investors siphoning profit away from wages actually reduces the number of jobs that exist in society…
Tldr; Taking money and paying it to investors reduces consumer demand which reduces jobs.
fletch, where do think the startup capital comes from in the first place to get these ventures, such as Virgin, off the ground?..it’s usually face/par value bonds. Bank finance is usually only for internal operating costs. The OTC bond market absolutely dwarfs the equities market. Do some research. BTW, Adam Smith studied the Hammurabi texts, ancient Sumer/Babylonian writings and developed his fiscal philosophy from there. To be kind I would say non original.
Adam Smith is a right wing economist… the invisible hand of the market is only useful for the economic right to pat themselves on the back for being better ruthlessly exploiting people for profit than those they exploit.
Homo economicus has always been a myth, because there is always power and information assymetry between people. You merely need to look at the role of education in emancipation from poverty to see that’s true.
All capital, historical and current is produced by a persons labour. So you’ll forgive me for not valuing an investors capital so much as I value a workers wage.
“Yeah and the whole idea that bond holders (non-econobabble language just call them investors)”
Well, not really fletch. Bond holders are actually “lenders” more than “investors”. Yes, there can be capital appreciation of bonds, but not always. Most bond holders have lent the money to the company for coupon value. The coupon is calculated within the covenants of the bond. Your other point regarding Adam Smith is correct. The financial system he quotes from the Hammurabi texts is identical to the Western Financial System we have today with it’s basis on usury and Babylonian styled politics. A study on Rev 17 & 18 will fill in the gaps.
Lending money in return for interest (however the interest payable is calculated) is a form of investment.
Babblebabblebabble.
Workers create wealth and jobs. Bondholders make money from money. During the good times we all get the lectures about how the idle wealthy deserve to make money for nothing because they’re taking a risk, but when the risk doesn’t work out they expect first bite at the pie.
I love your larrikin spirit Stephen and I liked Crikey a lot more when you ran it, but, sorry, your frequent flyer points don’t trump worker’s interests and entitlements.
That’s right. The workers should simply know their place and settle for any dregs they are thrown. Just because it was their labour that kept the whole shebang going, doesn’t mean they are entitled to anything, especially trivial stuff like wages or super or stuff.
No. They just need to trust their masters and sit patiently until called. After all, it’s not like workers have ever been screwed over before.
Yeah… and Stephens blind confidence that “government will pay workers entitlements” tells me he’d be a terrible appointment for working people.
I mean, visa workers are excluded from the Fair Entitlement Guarantee, I dunno who he thinks works at the airline… but there’s lots of workers who would be f-ed over by that assumption.
“Whoever offers them the highest cents in the dollar return should win the day and that’s who Deloitte should recommend to the creditors committee.” Well Stephen I don’t agree with this version of capitalism. Employees (including managers) and the customers are stakeholders as well, and in my book should have equal say to the shareholders. Paying the highest $$ is not the only criterion, what about ongoing employment, future growth plans, maintenance of essential services? If it was a cake shop in St George’s Terrace, in a genuinely free market, maybe you would be right. But not in an essential, highly regulated industry with a high cost of entry.
Stephen you clearly know a lot about this administration and creditor committee process but you only chose to tell us about the outcome. Some detailed explanation about how it works would be much better for the bulk of us who know little about it.
Back room deals ? Maybe. But how does that work ? How do bondholders get excluded ?
The bond holders may have been excluded from the initial meeting but within the covenants there will be clauses that will see them speaking softly but carrying a huge stick. Such as the deal is off unless…..But they have to be careful not to shoot themselves in the foot especially with a new Virgin entity.