Etihad to join Virgin capital raising, keep 21.8pc stake

Virgin is set to successfully close its $852m capital raising after Etihad said it’d take up its full entitlement.

Etihad will retain its 21.8 per cent shareholding in Virgin Australia and its seat on the board of directors. Pic: AFP

Virgin Australia is on track to successfully close its $852 million capital raising today after Etihad Airways broke its silence to confirm it would take up its full entitlement in the offer.

Had the Gulf carrier declined to take up the one-for-one non-­renounceable offer at 21c a share, it would have seen its 21.8 per cent stake in Virgin halve and its board seat at the Australian airline (VAH) taken away.

Etihad had been tight-lipped until today about its intention to participate in the raising, but it has now confirmed it will spend as much as $186m to maintain its 21.8 per cent share in Virgin.

“The Etihad Aviation Group board has endorsed a proposal to take up its pro-rata entitlement in the non-renounceable entitlement offer for new shares in Virgin Australia which closes at 5pm (AEST) today. As a result, the airline will retain its 21.8 per cent shareholding in Virgin Australia and its seat on the board of directors,” an Etihad spokesman said.

“Etihad Airways is a long-term strategic investor and commercial partner to Virgin Australia, and remains fully committed to the partnership as a shareholder.”

Virgin’s other major shareholders — Singapore Airlines, Virgin Group, HNA and Nanshan Group — have also committed to the raising.

Air New Zealand — which only owns 2.5 per cent having sold most of its stake to Nanshan — will also spend about $20m to take part in the raising.

Singapore Airlines had said it would spend up to $US200m to increase its stake to a maximum of 25.9 per cent. But with Etihad’s confirmed involvement, there is not likely to be enough left over shares for that to eventuate.

Singapore Airlines currently holds about 815m shares in Virgin or 23.1 per cent of the carrier. However, that stake will fall to 20.1 per cent when HNA receives regulatory approval to invest in the carrier meaning Singapore’s commitment to the capital raising will be about $171m.

As part of its participation in the capital raising, HNA — China’s biggest privately owned airline — will be allowed to increase its stake in Virgin to 19.99 per cent to a maximum investment by the group of $US300m.

The HNA top-up placement is subject to shareholder approval. Existing shareholders Singapore Airlines, Etihad Airways, Virgin Group and Air New Zealand have advised the Virgin Australia Group that they currently intend to vote to approve any additional top-up placement to HNA.