Virgin secures $425m debt deal

Virgin Australia has tapped major shareholders for a new loan facility as it pursues a review of its balance sheet.

Elizabeth Bryan

Virgin Australia has struck a debt deal with its four major shareholders for a year-long loan facility of $425 million, giving the company extra short-term flexibility as it embarks on a balance sheet restructure.

Air New Zealand, Etihad Airways, Singapore Airlines and Virgin Group are providing loan commitments proportional to their shareholding stakes in the company.

Virgin shares rose 7 per cent after the announcement.

Virgin (VAH) last raised money from the shareholding airlines in late 2013, when it sought $350m amid an escalating capacity war with rival Qantas as it evolved from a low cost carrier to a diversified airline group.

The company said over that period it had brought competition to Australian aviation by building a sizeable market share and offering choice to air travellers. Over the first six months of the financial year, Virgin booked its highest statutory profit since the first half of fiscal 2010.

“The Virgin Australia Group has now largely completed one of the most successful transformations in Australian corporate history and is reporting profitability and earnings growth,” chairman Elizabeth Bryan said.

“The board is focused on optimising the group’s balance sheet and capital structure to support the ongoing execution of its strategy and will lead a capital structure review.”

Chief executive John Borghetti said the last five years’ transformation had been significant.

“One of the key pillars of our Virgin Vision strategy is to optimise the group’s balance sheet, and the group has had an ongoing program in place to achieve this goal,” he said.

The balance sheet review will include an assessment of the appropriate mix of debt and equity capital and operational initiatives to enhance cash flow and profitability.