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(Reuters) – The Australian government said on Thursday it would buy A$50 million ($31.36 million) in debt from the bankrupt airline’s biggest creditor, Regional Express Holdings, to raise more control as part of a voluntary administration process.
The acquisition from Asian private equity firm PAG Asia Capital would make Rex the government’s largest secured creditor and allow the airline to continue serving Australia’s rural towns, Transport Minister Catherine King and Finance Minister Katy Gallagher in a press release.
This is “an important step to avoid 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:) 737 flights between major Australian cities, although it continues to operate flights to and from the 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 provided in December to keep Rex’s regional routes operating while administrators Ernst & Young search for a suitable buyer.
King and Gallagher said the government had also guaranteed regional flight bookings during the administration and facilitated early access to entitlements for former employees.
The Australian Department of Labor Relations has already paid out A$7.1 million in 302 claims filed by former employees, the statement added.
($1 = 1.5944 Australian dollars)