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Government Loan to Virgin Australia

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Government Loan to Virgin Australia

Old 13th Apr 2020, 02:57
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Originally Posted by RodH
Given the above how can you say it’s playing into Alan’s hands when they are getting equal treatment at this stage?
Because Allan's been lobbying for equal treatment......
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Old 13th Apr 2020, 03:20
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1) With the VA liabilities being approx. 50% greater than the value of assets the market capitalisation of approx. $700M is meaningless.

2) The Allan Joyce viewpoint of equal treatment is for every subsidised VA flight QF receives a subsidy for 4 flights or whatever his formula is.

Last edited by B772; 13th Apr 2020 at 03:34.
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Old 13th Apr 2020, 03:30
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This is hilarious. At a webinar about 3 weeks ago TLS told us that they had made submissions to government about a ďminimum networkĒ. He expected we might get something, probably not all of it, but the government wanted it. Has PS been asleep for the last 3 weeks? Suddenly heís now on the case. Please tell me that ainít true.
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Old 13th Apr 2020, 03:35
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Originally Posted by SandyPalms
Has PS been asleep for the last 3 weeks? Suddenly heís now on the case. Please tell me that ainít true.
He has been too busy spending money they don't have on useless advertising trying to gather public support for his cause. It's not his fault he inherited a shit storm. Just another headless chook running around.
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Old 13th Apr 2020, 03:36
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Originally Posted by The Bullwinkle
Either you've got a bad credit rating or you need to change banks!!!
do you think virgin has a good credit rating with its balance sheet and 10 years of losses?

S&P recently downgraded it to junk status
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Old 13th Apr 2020, 03:52
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Originally Posted by ECAMACTIONSCOMPLETE
do you think virgin has a good credit rating with its balance sheet and 10 years of losses?

S&P recently downgraded it to junk status
Your statement was "If I go to the bank and ask for a $1 million dollar loan on my $500,000 house, I'll be laughed out the door."
My advice for you to go to another bank was for you personally!
I could easily obtain loans for double the value of my house and I certainly wouldn't be laughed out the door, that's all I was saying.


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Old 13th Apr 2020, 03:55
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Originally Posted by The Bullwinkle
Your statement was "If I go to the bank and ask for a $1 million dollar loan on my $500,000 house, I'll be laughed out the door."
My advice for you to go to another bank was for you personally!
I could easily obtain loans for double the value of my house and I certainly wouldn't be laughed out the door, that's all I was saying.
it was an analogy...

the thread is about virgins finances, not mine

I donít really own a $500,000 house, it was a crude example of virgins situation, im sorry youíre confused

my understanding of the home loan system is that you can only borrow 80% of the value of the house, without mortgage insurance.

Is my understanding wrong or are you just gloating about your personal finances?

Last edited by ECAMACTIONSCOMPLETE; 13th Apr 2020 at 04:25.
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Old 13th Apr 2020, 04:07
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Originally Posted by ECAMACTIONSCOMPLETE
it was an analogy...

the thread is about virgins finances, not mine

I donít really own a $500,000 house, it was a crude example of virgins situation, im sorry youíre confused
no, you said ďThats essentially whst (sic) virgin are asking forĒ


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Old 13th Apr 2020, 04:12
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Goldman Sachs have released a report on airlines in the area:

Air New Zealand. Current price $0.90 Recommendation Sell Target price $0.54

Qantas. Current price $3.55 Recommendation Neutral Target price $3.03

Virgin Australia Current price $0.085 Recommendation Sell Target price $0.03
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Old 13th Apr 2020, 04:13
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Okay, Iíll try and reword it.

if Iím trying to borrow $1 million dollars using my $500,000 house as collateral, Iíve made no income for 10 years and I already have a mountain of credit card debts, I canít be shocked when the bank rejects me.

I hope this this clears it up
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Old 13th Apr 2020, 04:34
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Originally Posted by ECAMACTIONSCOMPLETE
Okay, I’ll try and reword it.

if I’m trying to borrow $1 million dollars using my $500,000 house as collateral, I’ve made no income for 10 years and I already have a mountain of credit card debts, I can’t be shocked when the bank rejects me.

I hope this this clears it up
But did you offer them equity 3 years down the line when you can't pay it back? This is where you have gone wrong. You should seek financial guidance.
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Old 13th Apr 2020, 04:41
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If VA wants a $1.4 B Loan from Government over three years then that amounts to three yearly equal re-payments of circa $466M as a simple example. Given the recent balance sheets the question to ask is will there likely to be a surplus of funds to service that debt with the other likely increases that all the supply chain sufferers will try an claw back to cover their own losses. Just watch the price of fuel as one example.
Govt may well decide that two mainline carriers are desirable grant the loan and take an equity position in any unpaid portion of the loan at the end of year 3 and then sell that down over time.
That may well be the only option as the complexity of the current VA opex/capex ratio does not give much room to move from looking at they balance sheet. Govt would also need to be sure Scurrah's restructuring and market positions moves to sort mess left by Il Duce are sound, which on balance they appear to be.
It is also likely that the QF Board will move on the Irishman in due course after they celebrate their 100th Birthday later this year and he may well be replaced by someone less adversarial but maybe not as competent, so lots of balls in the air for both players. There is unlikely to be any cabotage and I doubt any foreign buyer will be in a position to but VA and its debts and well as funding the VA opex in the next few years.
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Old 13th Apr 2020, 05:21
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Seems to me that some posters believe the governments desire for a limited domestic network, underwritten by the government, is connected to VAs request for $1.4 billion, they are unrelated.
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Old 13th Apr 2020, 06:54
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"It takes two to keep the air fair, and the airfares fairer" Interesting article in the Australian today.
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Old 13th Apr 2020, 08:19
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I have been trying to think what PS plans to do if granted the loan he is asking for. There's a few ways I am thinking he could be playing this.

1- The credit market isn't willing to lend him any money in the current environment. He plans to go and borrow the money over the next 3 years, once flying resumes and there is a steady stream of revenue coming in, from other sources to pay the government back in full.
2- He has no plan to pay it back. At current market value that would make VA 66% government owned and change the board influence from rivaling airlines.
3- A mix, he plans to pay back part of the loan and provide the government with either a majority 51% or a minority stake in the company.

The situation is allowing him to accelerate his right-sizing program. He has already made 1750 people redundant, most would agree there will be a lot more on the other side of this. He will be using the situation to lower costs everywhere possible, get out of every contract possible or renegotiate.
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Old 13th Apr 2020, 08:39
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The Australian tonight reporting that VAH is looking at a major debt restructure by a Deed of Company Arrangement or creditor's Scheme of Arrangement.
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Old 13th Apr 2020, 09:22
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Coming out of Canberra right now.

It could propel SQ to take it over. Forget the others. Remains to be seen.

Next 24hrs will be interesting.

Federal Treasurer Josh Frydenberg wants to maintain two airlines in Australia and could set the ball rolling by issuing $1.4 billion in convertible debt to Virgin Australia, convertible at $1, which would decimate shareholders.

The offer would need shareholder and bondholder support but would precipitate the change in ownership necessary to help the airline survive.

The proposal would wipe out shareholdersí equity but if the money was not repaid on time, and all going to plan, it would allow the government to sell its stake in the airline at - hopefully - a profit.

The proposal is not quite as simple as suggested because bondholders among its $5.1 billion in debt would also have a say.
The Virgin debt has a clause which requires it to be renegotiated if a new equity holder takes control, which means if the government was to take control it would also need to deal with the bondholders.

Existing shareholders donít need to renegotiate the debt so if the dream deal happened and Singapore Airlines took control, bondholders would be sidelined.
READ MORE:Virginís plea: help us across the bridge|Better uses for $1.4bn than Virgin|It takes two to keep the air fair|A Virgin collapse Ďbad news for nationí|Grounded airlines fight to survive|Troubled Virgin reduced to a wing and industry prayersThe suggestion comes as some confusion surrounds Deputy Prime Minister Michael McCormackís suggestion he has given the airline industry $1 billion in support to manage through the shutdown of the industry.

None of this money promised last week has ended up in the industryís hands except, it seems, $250 million which will go to Airservices Australia.

Airservices Australia is the government entity in charge of air traffic control and allied operations and the money will go to its account to compensate for the loss of revenue from the shutdown airlines.

The $720 million promised to the industry is in the form of discounts in charges which would have been, or were levied, since February.

The government will also set down the new routes applying under the shutdown, which will have Virgin and Qantas flying more than they do now on an underwritten basis. Currently Virgin is flying just Melbourne to Sydney one day a week.

Qantas, which normally flies the route 48 times a week, will be down to five times a week, among services to other centres.

The services are designed to cover emergencies and will largely be carrying freight.

The five airlines which have invested in Virgin have already had the value of their investments cut but this will all but disappear under any bailout package.

By way of example Singapore Airlines entered the Virgin register in 2012 with a 10 per cent stake and in 2013 acquired another 10 per cent at 48 cents a share, or $126.6 million. This would value 20 per cent at $253.2 million.

Its 20 per cent stake is now worth $167 million and under the convertible note proposal it would be worth virtually zero.

Given equity holders face being wiped out under any survival package, they would probably support the debt package if it meant keeping Virgin afloat.

But given any deal would virtually wipe out their equity and none of the holders are flush with cash due to their own domestic pressures, a Singapore Airlines takeover may look like a better alternative.

The government would back the move, which would please the Singapore government-controlled airline.

But there are a few steps to walk before the transactions occur.
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Old 13th Apr 2020, 09:33
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Looks like VAH are in play. If Singapore get it will be QF's longstanding worst case scenario. They have always feared Singapore in the Australian market and the Pacific.
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Old 13th Apr 2020, 09:45
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Originally Posted by non_state_actor
Looks like VAH are in play. If Singapore get it will be QF's longstanding worst case scenario. They have always feared Singapore in the Australian market and the Pacific.
Yeah nah. SIA has been planning to "take over" VAH for the past 5 years and it's all turned out to be "fake news" every time.

Also, QF isn't likely to fear "SIA" anytime soon, SIA has a prior dismal record with their record in Australia.
Strike 1: Air New Zealand (including Ansett) 25%
Strike 2: Tiger Airways Australia - 100% via Tiger Airways Holdings.
Strike 3: Virgin Australia 20%

Even with full control of their second attempt in Australia (Tiger Airways), SIA still couldn't get it right with the maintenance debacles. Their VAH shareholdings has just been a complete mess with 4 competing shareholders at the table, SIA has had plenty of opportunities to "take over VA" over the years but chose not to do so.

The Air NZ/Ansett bankruptcy debacle is self explanatory.

If SIA couldn't get their prior attempts right (especially when they had full control of their 2nd attempt through Tiger), there's little chance of SIA getting a "4th attempt" right.
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Old 13th Apr 2020, 09:48
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Originally Posted by non_state_actor
Looks like VAH are in play. If Singapore get it will be QF's longstanding worst case scenario. They have always feared Singapore in the Australian market and the Pacific.
Oh my Lordy, wonít the little Irish toad be upset if that happens! Strong and Dixon were concerned about a potential entity like SQ filling the Ansett gap but the foreign ownership laws prevented that from happening at the time. Well that was part of the reason. The parasite Joyce will be puckering with fear and anger at the mere thought of some aid being given to keep VA afloat. However, seeing is believing.
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