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-   -   Government Loan to Virgin Australia (https://www.pprune.org/australia-new-zealand-pacific/631164-government-loan-virgin-australia.html)

normanton 13th Apr 2020 02:57


Originally Posted by RodH (Post 10748220)
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...... :ugh:

B772 13th Apr 2020 03:20

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.

SandyPalms 13th Apr 2020 03:30

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.

normanton 13th Apr 2020 03:35


Originally Posted by SandyPalms (Post 10748275)
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.

ECAMACTIONSCOMPLETE 13th Apr 2020 03:36


Originally Posted by The Bullwinkle (Post 10748252)
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

The Bullwinkle 13th Apr 2020 03:52


Originally Posted by ECAMACTIONSCOMPLETE (Post 10748278)
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.



ECAMACTIONSCOMPLETE 13th Apr 2020 03:55


Originally Posted by The Bullwinkle (Post 10748284)
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?

chookcooker 13th Apr 2020 04:07


Originally Posted by ECAMACTIONSCOMPLETE (Post 10748286)
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



B772 13th Apr 2020 04:12

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

ECAMACTIONSCOMPLETE 13th Apr 2020 04:13

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 :)

normanton 13th Apr 2020 04:34


Originally Posted by ECAMACTIONSCOMPLETE (Post 10748296)
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. :8

chance 13th Apr 2020 04:41

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.

Icarus2001 13th Apr 2020 05:21

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.

Synergies 13th Apr 2020 06:54

"It takes two to keep the air fair, and the airfares fairer" Interesting article in the Australian today.

WipperSnapper 13th Apr 2020 08:19

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.

Vindiesel 13th Apr 2020 08:39

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.

wheels_down 13th Apr 2020 09:22

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.

non_state_actor 13th Apr 2020 09:33

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.

DanV2 13th Apr 2020 09:45


Originally Posted by non_state_actor (Post 10748482)
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.

Paragraph377 13th Apr 2020 09:48


Originally Posted by non_state_actor (Post 10748482)
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.

Ragnor 13th Apr 2020 10:01

Well thatís good, VA get the money they need, QF will also get more money. Win win whatís the problem?

Section28- BE 13th Apr 2020 10:17

Oh Dear-

HOW 'short' the memories................., 'Rupert'- 'they' (a funny looking Bloke, he 'was'- believe, his name 'was' John???, or some-such???) did, make a point of getting Rupert 'Out'..............., 'Keith Rupert' per chance????

Stuffs me!!!

Good Luck Paul & 'All'..........

Rgds all- Stay Safe
S28- BE

VH-ABC 13th Apr 2020 10:31

Does anyone here speak Section 28- BE?

Section28- BE 13th Apr 2020 10:52

Think!!!!- No, Not the ATIS.

Rgds ABC.
S28

dontgive2FACs 13th Apr 2020 11:15


Originally Posted by non_state_actor (Post 10748482)
Looks like VAH are in play. If Singapore get it.

Serious question here as I donít understand the business processes completely but very interested.

I thought SIA were already about 20% shareholder in VAH. Why would SIA then invest more money into VAH at the present time? (ie would that not expose themselves more to the massive asset/debt problem).

- Rather than try to trade out of the situation, would they not be best to wait until VAH in administration/collapse and then pick the assets up cheaply?
- In event of collapse, how would they be responsible to creditors as a present shareholder?
- Assuming they want to enter DOM market and reinvest after VAH administration/COVID, it would make things fairly interesting with foreign ownership laws. What type of business strategy would they use to get around this?

Hopefully none of this needed but very interested to understand the process if anyone able to explain.

Cheers

cloudsurfng 13th Apr 2020 11:20


Originally Posted by Paragraph377 (Post 10748491)
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.

i donít think he will be Puckering with fear. Whatever it is will be enough to keep VA afloat, and that is all. Itís not going to to make VA flush with cash or put it on level terms. Just keep it afloat. Still have to trade and make money, something which has been an ongoing challenge for VA, as you like to remind everyone. Itís not like getting this injection suddenly makes VA the dominant airline with more market share. Just keeps people in jobs. And as a QF pilot, Iím pretty happy with that.

non_state_actor 13th Apr 2020 11:36


Serious question here as I donít understand the business processes completely but very interested.

I thought SIA were already about 20% shareholder in VAH. Why would SIA then invest more money into VAH at the present time? (ie would that not expose themselves more to the massive asset/debt problem).

- Rather than try to trade out of the situation, would they not be best to wait until VAH in administration/collapse and then pick the assets up cheaply?
- In event of collapse, how would they be responsible to creditors as a present shareholder?
- Assuming they want to enter DOM market and reinvest after VAH administration/COVID, it would make things fairly interesting with foreign ownership laws. What type of business strategy would they use to get around this?.
All bets are off if it goes into administration and they will have no control of the outcome. In the meantime the Government may offer a loan to support the balance sheet, Singapore get to wipe out all the other airlines, get 100% feed from the Australian market through Singapore and quite possibly negotiate Pacific rights for Singapore Airlines whilst simultaneously castrating some of their biggest competitors in the region. They might be seeing it as a chance to expand Singapore Airlines through Australia. Virgin get a rebrand to something else, only do short haul, whilst Singapore get to do all the International in Widebody aircraft.
The only reason they would move now would be control and certainty of outcome. You have no control over administration, bit like deciding between taking a plea bargain or going to court.:}

The risk for them will be as you pointed out is the large exposure they will hold.

DanV2 13th Apr 2020 11:54


Originally Posted by non_state_actor (Post 10748601)
All bets are off if it goes into administration and they will have no control of the outcome. In the meantime the Government may offer a loan to support the balance sheet, Singapore get to wipe out all the other airlines, get 100% feed from the Australian market through Singapore and quite possibly negotiate Pacific rights for Singapore Airlines whilst simultaneously castrating some of their biggest competitors in the region. They might be seeing it as a chance to expand Singapore Airlines through Australia. Virgin get a rebrand to something else, only do short haul, whilst Singapore get to do all the International in Widebody aircraft.
The only reason they would move now would be control and certainty of outcome. You have no control over administration, bit like deciding between taking a plea bargain or going to court.:}

The risk for them will be as you pointed out is the large exposure they will hold.

SIA isn't that stupid to take on $5.5B in debt. It'll also fizzle out be "fake news", just like the 5424324324324323+ "SQ to Take Over VA" articles before this one.

Even if Virgin was offered to SIA for $1 including the $5.5B+ debts, they won't be that stupid and they'll follow their predecessors that faced the same situation with Ansett and will also decline the $1 offer.

Remember that SIA was in the same situation with Ansett (through their 25% shareholding in Air New Zealand) when Air New Zealand got desperate after mismanaging Ansett in oblivion.

After Air NZ's then-owner Brieley couldn't get the NZ govenrment to budge on their foreign ownership limits (which was 35% at the time - was also rumoured Dixon from QF lobbied the NZ government not to lift foreign ownership limits to 49%), NZ offered Ansett to Singapore for $1. SQ declined the offer.

NZ also offered Ansett to Qantas for $1 after Singapore declined. QF also declined.

After that NZ sent AN into voluntary administration.

non_state_actor 13th Apr 2020 12:08


SIA isn't that stupid to take on $5.5B in debt. It'll also fizzle out be "fake news", just like the 5424324324324323+ "SQ to Take Over VA" articles before this one.

Even if Virgin was offered to SIA for $1 including the $5.5B+ debts, they won't be that stupid and they'll follow their predecessors that faced the same situation with Ansett and will also decline the $1 offer.

Remember that SIA was in the same situation with Ansett (through their 25% shareholding in Air New Zealand) when Air New Zealand got desperate after mismanaging Ansett in oblivion.

After Air NZ's then-owner Brieley couldn't get the NZ govenrment to budge on their foreign ownership limits (which was 35% at the time - was also rumoured Dixon from QF lobbied the NZ government not to lift foreign ownership limits to 49%), NZ offered Ansett to Singapore for $1. SQ declined the offer.

NZ also offered Ansett to Qantas for $1 after Singapore declined. QF also declined.

After that NZ sent AN into voluntary administration.
Yes that is the risk they are taking. I guess they have to decide if an opportunity to capture the Australian market is worth it. I'd bet a small wager that Singapore would also push for access to the Pacific for them as well as they are in a very strong bargaining position and something they have coveted for a eternity.

Paragraph377 13th Apr 2020 12:09


Originally Posted by Section28- BE (Post 10748522)
Oh Dear-

HOW 'short' the memories................., 'Rupert'- 'they' (a funny looking Bloke, he 'was'- believe, his name 'was' John???, or some-such???) did, make a point of getting Rupert 'Out'..............., 'Keith Rupert' per chance????

Stuffs me!!!

Good Luck Paul & 'All'..........

Rgds all- Stay Safe
S28- BE

He is an interesting commentator and he has been around the traps. I think he is referring in part to Rupert Murdochís Newscorp owning a stake in Ansett in the 90ís? Dunno. Good old days - Murdoch and Abeles, arch enemies teaming up at Ansett.


DanV2 13th Apr 2020 12:16


Originally Posted by non_state_actor (Post 10748628)
Yes that is the risk they are taking. I guess they have to decide if an opportunity to capture the Australian market is worth it. I'd bet a small wager that Singapore would also push for access to the Pacific for them as well as they are in a very strong bargaining position and something they have coveted for a eternity.

The Pacific route isn't that 'high yielding' as it used to be. Especially during the era when there was 3 cartels on this route QF/AA, DL/VA and UA.

Post COVID-19 may possibly see it go back to QF and UA again, with the former concentrating primarily on LAX and DFW with their JV partner AA codesharing, and UA retreating to SFO.

The Australian Government isn't likely to budge on 5th freedom rights. SQ's application was declined by both Australia and the USA's DoT.
I remember that even though the US DoT approved AC's 5th freedom application, the Australian authority decided to decline AC's application on the route in the late 90s when AC proposed YYZ-LAX-SYD as an alternative to SQ's SIN-SYD-LAX.

Buster Hyman 13th Apr 2020 14:16


Currently Virgin is flying just Melbourne to Sydney one day a week.
Qantas, which normally flies the route 48 times a week,
Really? No wonder its so hard to make a buck in Aviation.

krismiler 13th Apr 2020 15:29

The Australian Government want Virgin to continue but don't want to save it themselves so how about they let SIA take it over, ie full ownership and control rather than a minority shareholding ? In return for assuming the liabilities and keeping all the staff on, they get full access to the domestic market which is what they always wanted. Lose everything except the B737s which effectively become SIA domestic short range. Long range, such as PER - BNE is done by extending the current flights from Singapore. SIA fly to most major Australian airports multiple times a day anyway so all the infrastructure is already in place , eg maintenance coverage, check in desks, lounges. Even without Virgin, SIA could run a significant domestic network on its own eg. SIN - PER - BNE - SIN and SIN - BNE - PER - SIN gives a return flight between Perth and Brisbane and still keeps Singapore as a non stop routing. Multiply that with other city pairs and you have a basic network going very quickly. If the approval was given, all they need to do is load the flights into the reservations system and alter the advertising a bit. They will certainly have plenty of spare capacity post COVID - 19.

This time QF would have a competitor that wouldn't be undermined by JQ as it would be pulling in higher end less price sensitive pax. SIA would be very attractive to the corporate market as it begins its slow climb back, with a proper business class product and Star Alliance membership. The SIA brand is very well established already and with the strong links between Australia and Singapore there are no security concerns which might occur with an Air China take over. Qantas could be defending a 50% line in the sand rather than a 65% one in terms of market share.

The deal could be sold on the basis of keeping Australians employed in these troubled times and maintaining competition thereby keeping fares down, it would also stop Qantas from becoming too powerful. With the current exchange rate AU$5.1 billion is loose change to Singapore Incorporated and will certainly pay back in the long term.

In normal times QF could simply get the choir singing "I still call Australia home." as an accompaniment to a nationalistic advertising campaign about protecting Australian companies. These aren't normal times, now SIA would be saving Australian jobs directly and indirectly with a takeover.

DanV2 13th Apr 2020 21:22


Originally Posted by krismiler (Post 10748792)
The Australian Government want Virgin to continue but don't want to save it themselves so how about they let SIA take it over, ie full ownership and control rather than a minority shareholding ? In return for assuming the liabilities and keeping all the staff on, they get full access to the domestic market which is what they always wanted. Lose everything except the B737s which effectively become SIA domestic short range. Long range, such as PER - BNE is done by extending the current flights from Singapore. SIA fly to most major Australian airports multiple times a day anyway so all the infrastructure is already in place , eg maintenance coverage, check in desks, lounges. Even without Virgin, SIA could run a significant domestic network on its own eg. SIN - PER - BNE - SIN and SIN - BNE - PER - SIN gives a return flight between Perth and Brisbane and still keeps Singapore as a non stop routing. Multiply that with other city pairs and you have a basic network going very quickly. If the approval was given, all they need to do is load the flights into the reservations system and alter the advertising a bit. They will certainly have plenty of spare capacity post COVID - 19.

This time QF would have a competitor that wouldn't be undermined by JQ as it would be pulling in higher end less price sensitive pax. SIA would be very attractive to the corporate market as it begins its slow climb back, with a proper business class product and Star Alliance membership. The SIA brand is very well established already and with the strong links between Australia and Singapore there are no security concerns which might occur with an Air China take over. Qantas could be defending a 50% line in the sand rather than a 65% one in terms of market share.

The deal could be sold on the basis of keeping Australians employed in these troubled times and maintaining competition thereby keeping fares down, it would also stop Qantas from becoming too powerful. With the current exchange rate AU$5.1 billion is loose change to Singapore Incorporated and will certainly pay back in the long term.

In normal times QF could simply get the choir singing "I still call Australia home." as an accompaniment to a nationalistic advertising campaign about protecting Australian companies. These aren't normal times, now SIA would be saving Australian jobs directly and indirectly with a takeover.

You are assuming that SIA wants to take over, SIA had plenty of opportunties to "take over" in the past and they haven't. If SIA really wanted into the Australian market, they would've "taken over" VA by now instead of fizzling out the 43243423432432+ "fake news" articles in the past 5 years.

SIA are also not that stupid to pick up a $5.5B debt ridden company for a $1. SIA faced the same situation with Ansett in 2001 when a desperate Air NZ offered AN for $1 (with debts and liabilities included).

Also as mentioned, SIA aren't "that competent" at operating in the Australian domestic market, as evidenced by their 3 prior failures in the Australian market, which includes the Tiger Airways debacle when running that operation out of the sheds in Melbourne. QF has nothing to worry about, even if SIA picks up the VA scraps at a liquidation sale.

SIA may be well known in the Australian market, but their record of running companies outside of their own brand has been dismal overall. Air NZ/Ansett, Virgin Atlantic, Tiger Airways Australia and Virgin Australia are 4 examples of SIA's failures.

SIA are not much better than EY when it comes to equity investments, dismal at best (including 1 bankruptcy - possibility 2 bankruptcies) when compared to EY's string of bankruptcies.

SQ aren't the "so-called Messiah" that many people claim to be. Considering the string of of incompetence decisions they've been involved in with their investments over the years.

crosscutter 13th Apr 2020 22:17

It seems debt is being restructured. So who owns the debt, who are the major bondholders and are they going to be satisfied with the restructure?

if the airline was faced with a wipeout the debt holders are faced with getting cents per their dollar of debt. They will grasp on to any alternative to recoup and have a say in some of their debt Ďinvestmentí. The term may be secured creditors but the sleepless nights say otherwise.

For the hardworking employee at least the Borg Balance Sheet Disaster looks to be heading in a direction with a future.

DanV2 13th Apr 2020 23:48

Virgin Australia had just called a Trading Halt this morrning.
https://www.asx.com.au/asxpdf/202004...k8qjtq4344.pdf

It's either related to:
Frydenberg's announcement yesturday, and/or
Virgin Australia appointing Houlihan Lokey as Debt Restructure Administrators yesturday.

DanV2 14th Apr 2020 00:13

https://www.theaustralian.com.au/bus...c9bb512ff8a431


Virgin Australia went into a trading halt on Tuesday and whether it emerges is up in the air, with the best hope being some sort of federal government support.

Virgin chief executive Paul Scurrah spent the Easter weekend calling federal government ministers and opposition frontbenchers in a bid to secure support ahead of a cabinet meeting today that could decide the debt-heavy airline’s future.

A Virgin spokesman said the trading halt was requested as the company continued to consider ongoing issues with respect to financial assistance and restructuring alternatives.“This has arisen due to the unprecedented COVID-19 crisis which has particularly impacted the aviation sector,” the spokesman said. “We value the ongoing support of our customers.”

It comes as the Morrison government comes under increasing pressure to help the airline stay afloat and maintain a competitive airline market for when the COVID-19 crisis lifts.

Canberra has so far been reluctant to commit to anything, hoping Virgin can first do a deal with debt and equity holders who both face losing much of their investment.


The $2 billion in unsecured debt is spread across five bond issues trading at between 35 and 50 cents in the dollar.

One bond is trading in Australia and is presently at 37 cents in the dollar.

The rest of the debt, around $3 billion, is secured against aircraft and is more complicated to organise, so the plan to is to deal with unsecured holders as one vote and the five equity holders - all foreign airlines and in an equally difficult financial position - as the other group.

The dream deal would be to get 20 per cent stake holder Singapore Airlines to invest but Mr Scurrah is not banking on that happening.

His best hope is some sort of government guarantee in a deal which will see the equity and unsecured debt all but wiped out.

The federal government will on Tuesday release details of a deal with Qantas and Virgin to underwrite a skeleton network across Australia, but this will not save Virgin.

The timing of any deal will determine whether Virgin emerges from a trading halt early next week.

Mr Scurrah has attempted to put together a package which may save the airline.

International routes are gone, Tiger’s future is in doubt and the airline will focus its efforts on the domestic market.

His predecessor John Borghetti built an airline aimed at taking market share from Qantas, more than making money.

Mr Scurrah is putting all his cards on the last option - making money in the most difficult environment for global aviation.

All options are on the table including voluntary administration, but that is hoped to be avoided and instead Mr Scurrah is trying to do a deal with the debt and equity holders.

He has investment bankers Houlihan Lokey and UBS helping him on the job.

Canberra has studiously avoided committing itself to any package for fear it will set in train a congo line of companies wanting a similar deal.

But it also has not ruled out backing Mr Scurrah and has made clear it wants two domestic carriers.

Virgin Australia said today it had been keeping the “air fair” in Australia for 20-years and the company wanted to continue to provide a valuable service to all Australians.

The airline employed 16,000 people “directly and indirectly” and its continued operation would enable the broader economy to restart quickly once the crisis had eased, he said.

Toruk Macto 14th Apr 2020 00:54

Good luck to Virgin employees today .

krismiler 14th Apr 2020 01:51

The Virgin directors are obviously worried about being called in for trading whilst insolvent, the airline is grounded at the moment anyway but forward ticket sales are available eg BNE - SYD in July is still being offered on the website. Once the travel agents stop selling their tickets and insurers refuse coverage for bookings it's generally game over.

Australia has never had two airlines which competed equally in domestic, regional and international. Ansett was great domestically but once you wanted to go overseas things fizzled out quickly, same with Virgin, neither of them came close to the reach or frequency of Qantas. Having two strong major airlines, each with a 50% share might be seen in government as a better option than a dominant Qantas with its competitor going bust every ten years or so. A balance would be achieved and hopefully both airlines would be profitable, paying taxes and supporting Australian jobs and businesses.

Cathay Pacific threatened to start an Australian operation if Jetstar Hong Kong got going, but that seems to have died off, and CX have more than enough problems at the moment anyway.

It all depends on what's on the table, how much of a financial commitment is needed from a potential rescuerer and what's on offer in return.

SIA also have a joint venture airline in India called Vistara, anyone going into the Indian aviation needs have an adventurous spirit.

DanV2 14th Apr 2020 01:55


Originally Posted by krismiler (Post 10749216)
The Virgin directors are obviously worried about being called in for trading whilst insolvent, the airline is grounded at the moment anyway but forward ticket sales are available eg BNE - SYD in July is still being offered on the website. Once the travel agents stop selling their tickets and insurers refuse coverage for bookings it's generally game over.

Australia has never had two airlines which competed equally in domestic, regional and international. Ansett was great domestically but once you wanted to go overseas things fizzled out quickly, same with Virgin, neither of them came close to the reach or frequency of Qantas. Having two strong major airlines, each with a 50% share might be seen in government as a better option than a dominant Qantas with its competitor going bust every ten years or so. A balance would be achieved and hopefully both airlines would be profitable, paying taxes and supporting Australian jobs and businesses.

Cathay Pacific threatened to start an Australian operation if Jetstar Hong Kong got going, but that seems to have died off, and CX have more than enough problems at the moment anyway.

It all depends on what's on the table, how much of a financial commitment is needed from a potential rescuerer and what's on offer in return.

SIA also have a joint venture airline in India called Vistara, anyone going into the Indian aviation needs have an adventurous spirit.

Also add to fact that SIA has been pumping $$ in Vistara before COVID-19 with their 49% stake, even buying planes for Vistara suggests Virgin Australia is NOT a priority for SIA.

However the timing of SIA buying 787s for Vistara, followed by COVID-19 hitting suggests that they have a long task ahead on their hands as long-haul travel in general will take a long while to rebound, although Indian travel may (or may not) rebound quicker than Australia.

Like with VA, perhaps Vistara should stick to domestic and short haul international (and put long haul on the back burner) for the mean time when COVID-19 subsides. Yes it would mean SIA and TATA (the 51% shareholders) may have to write down the investments on their recent 787 acquisitions..


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