A report by Adele Ferguson in news.com.au says that the collapse of last year’s $11billion takeover offer for Qantas was a near miss for the national airline, which today would be struggling to remain competitive if its private equity predators had succeeded in their debt-funded bid.
The bid for Qantas, driven by the ailing Allco Finance Group at the peak of private equity takeovers in Australia, would have increased the airline’s bank debt more than four-fold to $10.7billion.
Analysts said that, at best, Qantas would now be drawing on cash reserves to pay weekly interest bills of $20million and would have embarked on a massive cost-cutting and asset-sale drive to cope with the economic downturn striking all airlines.
At worst, one said, the national icon could have become “a crippled airline that a cynic might suggest would end up in government hands”, the Weekend Australian reports.
At least half of the rash of private equity takeovers in Australia in the past two years now look precarious as the credit crunch makes it tough for companies to service debts and as investors lose faith in private equity firms.
The Qantas takeover by a consortium called Airline Partners Australia had the full support of the Qantas board, but collapsed spectacularly in May last year when a US hedge fund failed to accept the offer in time.
Analysts believe that if the deal had gone ahead early last year, APA would now be struggling to service an annual interest bill approaching $1billion based on industry rates, with almost no chance of rolling over the debt on favourable terms.
The recent scrapping of the $2billion float of the Frequent Flyer business – on the basis of depressed stock markets – would have left a hole in the accounts, although APA might have moved faster on asset sales in an effort to cut its debt than Qantas has.
A Report by The Mole
