Government Loan to Virgin Australia
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Virgin Australia's biggest shareholders have passed up a deal to tip in fresh funds and recapitalise the airline, opening up the equity search to outside investors.It is understood Virgin started its equity search with the five shareholders, who together own more than 90 per cent of the airline's shares on issue.
The five shareholders were invited into the data room and shown a deal that would've seen them lead the looming and necessary financial restructure
The equity injection would've happened at the same time as lenders took a steep haircut, and required the existing shareholders to re-invest in the company to retain their place on Virgin's share register.
It is understood the due diligence process finished early this week - and it is at the stage where the five big shareholders have had to opt in or out.
Four of the five opted out, sources said, while the fifth was a "maybe".The four to opt out were Etihad Airways, Singapore Airlines, Nanshan Group and HNA Group, who together own 80 per cent of the company.
The "maybe" was Richard Branson's Virgin Group, whose attachment to the Australian business goes beyond its 10 per cent stake.
Being strategic investors, each has bigger problems closer to home. Airlines across the world have had to ground planes in response to the COVID-19 outbreak and are fighting for survival.
So Virgin's search moves to potential new investors - and it is understood to be particularly keen on Australian investors, in what would be a dramatic overhaul of its share register.
It remains to be seen whether any investors will take the bait. The equity search is running at the same time as a debt restructure, which would be expected to see the company's lenders take a big haircut on their investments.
It also comes as Virgin has gone to Canberra to seek its assistance. Virgin is seeking $1.4 billion in fresh funds, and asked the government to play a role in the mooted bail out.
The government piece is arguably the most material piece of information for any potential investors and has real implications for Virgin's restructure and the airline's future.
Should it all come together, Virgin may be able to avoid administration. If not, then it could become the next Arrium, and be auctioned off to the highest bidder and proceeds handed to creditors by order of seniority.
Equity holders are expected to be wiped out, whichever way the deal goes. The five strategic investors account for about 90 per cent of the share register.
Virgin shares are in a trading halt while the deal plays out. Morgan Stanley and UBS are managing the data room, while restructuring specialist Houlihan Lokey handles the debt side of the equation.
It had $4.8 billion in interest bearing liabilities at December 31 and $900 million in unrestricted cash and short term investments. Its next debt maturity is a $US350 million bond due in October 2021.
The $4.8 billion interest bearing liabilities included $1.8 billion in unsecured bonds, $1.6 billion lease liabilities, $1.2 billion aeronautic finance facilities and $221 million in bank loans. The aeronautic finance facilities and bank loans were secured, according to the company's interim financial report.
The unsecured bonds include the $325 million retail notes and $US425 million institutional notes issued to buy back full control of Velocity Frequent Flyer late last year.
It's a very different capital structure to Arrium, which was the last big workout bankruptcy in Australia. Arrium failed owing more than $4 billion and each of the big four Australian banks were towards the top of the list of creditors.
The five shareholders were invited into the data room and shown a deal that would've seen them lead the looming and necessary financial restructure
The equity injection would've happened at the same time as lenders took a steep haircut, and required the existing shareholders to re-invest in the company to retain their place on Virgin's share register.
It is understood the due diligence process finished early this week - and it is at the stage where the five big shareholders have had to opt in or out.
Four of the five opted out, sources said, while the fifth was a "maybe".The four to opt out were Etihad Airways, Singapore Airlines, Nanshan Group and HNA Group, who together own 80 per cent of the company.
The "maybe" was Richard Branson's Virgin Group, whose attachment to the Australian business goes beyond its 10 per cent stake.
Being strategic investors, each has bigger problems closer to home. Airlines across the world have had to ground planes in response to the COVID-19 outbreak and are fighting for survival.
So Virgin's search moves to potential new investors - and it is understood to be particularly keen on Australian investors, in what would be a dramatic overhaul of its share register.
It remains to be seen whether any investors will take the bait. The equity search is running at the same time as a debt restructure, which would be expected to see the company's lenders take a big haircut on their investments.
It also comes as Virgin has gone to Canberra to seek its assistance. Virgin is seeking $1.4 billion in fresh funds, and asked the government to play a role in the mooted bail out.
The government piece is arguably the most material piece of information for any potential investors and has real implications for Virgin's restructure and the airline's future.
Should it all come together, Virgin may be able to avoid administration. If not, then it could become the next Arrium, and be auctioned off to the highest bidder and proceeds handed to creditors by order of seniority.
Equity holders are expected to be wiped out, whichever way the deal goes. The five strategic investors account for about 90 per cent of the share register.
Virgin shares are in a trading halt while the deal plays out. Morgan Stanley and UBS are managing the data room, while restructuring specialist Houlihan Lokey handles the debt side of the equation.
It had $4.8 billion in interest bearing liabilities at December 31 and $900 million in unrestricted cash and short term investments. Its next debt maturity is a $US350 million bond due in October 2021.
The $4.8 billion interest bearing liabilities included $1.8 billion in unsecured bonds, $1.6 billion lease liabilities, $1.2 billion aeronautic finance facilities and $221 million in bank loans. The aeronautic finance facilities and bank loans were secured, according to the company's interim financial report.
The unsecured bonds include the $325 million retail notes and $US425 million institutional notes issued to buy back full control of Velocity Frequent Flyer late last year.
It's a very different capital structure to Arrium, which was the last big workout bankruptcy in Australia. Arrium failed owing more than $4 billion and each of the big four Australian banks were towards the top of the list of creditors.
A quick note to SCo MOs inbox to remind him that if he gets this wrong your vote will go somewhere else is always and sometimes the only way to get their attention. All the other major countries have assisted their airlines and Qantas will also need additional assistance too. Does anyone see any International flying happening in the near term that will keep a fleet busy?
Pointless blaming the government, they didn’t create this virus, nor the pandemic. The government is trying to minimise loss of life. Possibly it’s heavy handed and an overreaction but every politician has an eye towards next weeks headlines. No one wants to be called a callous killer by the baying media - which is precisely what will happen if they stray outside the lines of medical advice and things go pear shaped.
You may disagree with them as to the value of keeping the 80 year old demographic alive versus keeping you in full time work but that’s just a matter of philosophy which can only be answered with hindsight.
You may disagree with them as to the value of keeping the 80 year old demographic alive versus keeping you in full time work but that’s just a matter of philosophy which can only be answered with hindsight.
There's plenty of people also who will support the govt not guaranteeing the debts or bailing out a company that hasn't made a profit in 8 years, if they do this there's every chance it could collapse at some future point in a depressed post COVID market. I do tho hope they can survive for all's benefit.
A quick note to SCo MOs inbox to remind him that if he gets this wrong your vote will go somewhere else is always and sometimes the only way to get their attention. All the other major countries have assisted their airlines and Qantas will also need additional assistance too. Does anyone see any International flying happening in the near term that will keep a fleet busy?
That's not to say I don't feel for anyone who works for VA, of course I do, but there's a business ethics and then a people ethics way of approaching this.
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A quick note to SCo MOs inbox to remind him that if he gets this wrong your vote will go somewhere else is always and sometimes the only way to get their attention. All the other major countries have assisted their airlines and Qantas will also need additional assistance too. Does anyone see any International flying happening in the near term that will keep a fleet busy?
A bailout of Qantas is a much more politically easy decision, majority Aussie owned, Aussie icon and making record profits in the years leading up to COVID-19. Plus if they ask for a bailout, it will be 6-12 months into the crisis. The fact that Virgin has asked for this barely a month in, shows how precarious it’s finances were, all the more reason to let it slip.
Just one mans opinion, no offence meant to the staff and I wish the best of luck to you all.
It's been said before:
Qantas has a 49% cap on foreign ownership.
Virgin is over 91% foreign owned.
Different beasts, actually and politically.
The more pertinent comparison is the assistance given to 100% foreign-owned Rex....
Qantas has a 49% cap on foreign ownership.
Virgin is over 91% foreign owned.
Different beasts, actually and politically.
The more pertinent comparison is the assistance given to 100% foreign-owned Rex....
to simplify, can you please state where exactly your line stands??
regardless, the government has openly stated its stance on not picking winners and any support will be on an industry wide basis.
hard to go back on that without recourse. Now for Va or in 6 months for QF.
Evertonian
I assume you don’t support the money on offer to regional airlines? Or the money being spent keeping childcare centres open. Or the money being given to universities to help them offset the massive loss in revenue from foreign students. I also assume you’ll hand back any job keeper subsidy you (or your company) is receiving because sure as hell having the government chip in $3k a month per employee isn’t a free market either.
What I can say is the government introduced these measures and strangled our airline industry. It completely restricts our ability to trade. Airlines need forward bookings and consumer confidence.
Yes, the government can’t pick winners or losers, but it’s the government who’s done this to its companies and citizens to save its health system and liability. So it’s the government who needs to sort it out.
Yes, the government can’t pick winners or losers, but it’s the government who’s done this to its companies and citizens to save its health system and liability. So it’s the government who needs to sort it out.
There's a high chance of that happening, but the ALP is a bit like SIA, all talk no action. I recall Beasley sitting on an Ansett tug telling us all what he'd do if he was in power. When they did get into power, they didn't want to know us!
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Last edited by Turnleft080; 15th Apr 2020 at 05:09.
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The government should have told Rex to get stuffed.
The difference here is that Rex are profitable, and Virgin are not. They have a debt of over $5b, and couldn't make money when the times were good. They definitely wont be making money when the times are bad, and they definitely wont be making money post COVID-19 without significant changes and a restructure. I don't want my $1.4b tax payer dollars spent on a gamble.
wishiwasupthere said so at post #495.
Maybe someone said something on pprune that's not accurate...
Maybe someone said something on pprune that's not accurate...
REX is not 100% foreign owned. In fact the top 20 shareholders only own 86.8% of the company. You would be surprised at who owns small holdings in REX. REX is up 23% today on the ASX.
REX know the SF340 is too small for the larger markets in the ADL-MEL-CBR-SYD incl Tasmania golden triangle. They are looking at larger aircraft again. This makes 3 airlines who are interested in commencing an operation cherry picking routes. Watch this space when the wheels fall off VA.
REX know the SF340 is too small for the larger markets in the ADL-MEL-CBR-SYD incl Tasmania golden triangle. They are looking at larger aircraft again. This makes 3 airlines who are interested in commencing an operation cherry picking routes. Watch this space when the wheels fall off VA.
Etihad have squandered billions on questionable investments in the airline world and may end up merging with Emirates so they aren't in a position to step up to the plate.
HNA group is a similar position to Virgin and is having to restructure its own debts. https://www.scmp.com/business/compan...ea-time-caused
That takes two of the bigger five out of the equation. Richard Branson is the smallest of the five and will not want to risk his entire fortune.
That leaves the Nanshan Group which is one of China's largest companies and already has airline interests amongst its diversified holdings, together with Singapore Airlines left in the running.
A tie up between these two might be on the cards with Nanshan fronting the bulk of the cash and SIA kicking in some money and the management expertise. The fate of Virgin could be in the hands of a labyrinth of Chinese business networks. Taking a loss on their current positions might be worthwhile if they can acquire a new entity in restructured form, free of debt. Around 60 - 70 B737s operating on cherry picked routes with the infrastructure already in place might turn a profit within a reasonable timeframe once restrictions are lifted.
HNA group is a similar position to Virgin and is having to restructure its own debts. https://www.scmp.com/business/compan...ea-time-caused
That takes two of the bigger five out of the equation. Richard Branson is the smallest of the five and will not want to risk his entire fortune.
That leaves the Nanshan Group which is one of China's largest companies and already has airline interests amongst its diversified holdings, together with Singapore Airlines left in the running.
A tie up between these two might be on the cards with Nanshan fronting the bulk of the cash and SIA kicking in some money and the management expertise. The fate of Virgin could be in the hands of a labyrinth of Chinese business networks. Taking a loss on their current positions might be worthwhile if they can acquire a new entity in restructured form, free of debt. Around 60 - 70 B737s operating on cherry picked routes with the infrastructure already in place might turn a profit within a reasonable timeframe once restrictions are lifted.
Etihad have squandered billions on questionable investments in the airline world and may end up merging with Emirates so they aren't in a position to step up to the plate.
HNA group is a similar position to Virgin and is having to restructure its own debts. https://www.scmp.com/business/compan...ea-time-caused
That takes two of the bigger five out of the equation. Richard Branson is the smallest of the five and will not want to risk his entire fortune.
That leaves the Nanshan Group which is one of China's largest companies and already has airline interests amongst its diversified holdings, together with Singapore Airlines left in the running.
A tie up between these two might be on the cards with Nanshan fronting the bulk of the cash and SIA kicking in some money and the management expertise. The fate of Virgin could be in the hands of a labyrinth of Chinese business networks. Taking a loss on their current positions might be worthwhile if they can acquire a new entity in restructured form, free of debt. Around 60 - 70 B737s operating on cherry picked routes with the infrastructure already in place might turn a profit within a reasonable timeframe once restrictions are lifted.
HNA group is a similar position to Virgin and is having to restructure its own debts. https://www.scmp.com/business/compan...ea-time-caused
That takes two of the bigger five out of the equation. Richard Branson is the smallest of the five and will not want to risk his entire fortune.
That leaves the Nanshan Group which is one of China's largest companies and already has airline interests amongst its diversified holdings, together with Singapore Airlines left in the running.
A tie up between these two might be on the cards with Nanshan fronting the bulk of the cash and SIA kicking in some money and the management expertise. The fate of Virgin could be in the hands of a labyrinth of Chinese business networks. Taking a loss on their current positions might be worthwhile if they can acquire a new entity in restructured form, free of debt. Around 60 - 70 B737s operating on cherry picked routes with the infrastructure already in place might turn a profit within a reasonable timeframe once restrictions are lifted.
4 out of 5 shareholders in Australia had declined putting in more equity. The only shareholder on the fence is Virgin Group/Richard Branson.
Only way that the "so-called Saviour" Singapore is going to get involved is if they pick up the VA assets at a liquidation sale. Then again, they'd be questioned whether if they can actually run a airline company in Australia, they've had 3 failed attempts already. (including VA).
If VA come out the other side of this they will more than likely resemble the Virgin Blue of the old days rather than the modest fleet you speak of.
Everyone agrees recovery will be slow... and you’ve got them flying around 70 737’s???