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(Reuters) – The Australian government said on Thursday it would buy 50 million Australian dollars ($31.36 million) of debt from the biggest creditor of failed airline Regional Express Holdings to gain more control during a voluntary administration process.
The acquisition from Asian private equity firm PAG Asia Capital would make the government Rex’s main secured creditor and keep the airline serving Australia’s rural towns, Transport Minister Catherine King and Finance Minister Katy Gallagher said.
It is “an important step to prevent an adverse outcome for regional communities, such as liquidation, and ensure the continued connectivity of Australia’s regional and remote communities,” it said.
Rex entered voluntary administration in July, cutting hundreds of jobs and grounding its Boeing (NYSE: ) 737 flights between major Australian cities, although it continues to operate flights to and from rural areas.
It owes about A$500 million to 4,800 creditors after failing to compete with Qantas and Virgin Australia, which together control 98% of the domestic market.
The government’s A$50 million acquisition comes on top of an A$80 million loan in December to maintain Rex’s regional routes while administrators Ernst & Young search for a suitable buyer.
King and Gallagher said the government also guaranteed regional flight bookings during the administration and provided early access rights for former employees.
Australia’s Department of Workplace Relations has already paid out A$7.1 million in 302 claims made by former employees, the statement added.
(1 USD = 1.5944 Australian dollars)
