(Reuters) - The Australian government said on Thursday it would buy A$50 million dollars ($31.36 million) of debt from the largest creditor of collapsed airline Regional Express Holdings to have more control during a voluntary administration process.
The acquisition from Asian private equity house PAG Asia Capital would make the government Rex’s principal secured creditor and keep the airline serving Australia’s rural towns, Transport Minister Catherine King and Finance Minister Katy Gallagher said in a statement.
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,” the statement said.
Rex entered voluntary administration in July, cutting hundreds of jobs and grounding its Boeing (NYSE:BA) 737 flights between Australia’s major cities, though 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 a A$80 million loan in December to keep Rex’s regional routes running as administrators Ernst & Young search for a suitable buyer.
King and Gallagher said the government had also guaranteed regional flight bookings during administration and facilitated early access to entitlements for former employees.
Australia's workplace relations department has already paid out A$7.1 million in 302 claims lodged by former employees, the statement added.
($1 = 1.5944 Australian dollars)