Bain Capital is appointing Goldman Sachs, UBS and Barrenjoey for the float of its airline Virgin Australia.
The carrier is being positioned as a business that is expected to be valued at $3bn and the listing comes after Bain Capital purchased the airline out of voluntary administration during the global pandemic in 2020.
When it collapsed, Virgin had loans worth $5bn, and expectations are it will list with low debt levels that would be less than one times its earnings.
There were eight banks that pitched for a mandate over a week ago, including UBS, Goldman Sachs, Morgan Stanley, Barrenjoey, Credit Suisse, Bank of America, Jefferies and RBC.
The float is expected to be attempted around May or June and a value of about $3bn is likely to emerge for the airline, equating to 7-8 times its net profit, say sources.
Virgin Australia is understood to be generating about $400m in annual net income.
Suggestions are that Bain will likely retain between 50 and 60 per cent of the business.
Bain bought Virgin out of collapse in 2020 for $3.5bn including debt, and before it entered voluntary administration, it had loans worth $5bn.
Run by former Qantas and Jetstar executive Jayne Hrdlicka, the carrier experienced bumper conditions last year as people resumed travel.
Ms Hrdlicka has been targeting a 33 per cent share of the domestic market by increasing the frequency of flights and reach of its network.
Qantas and Jetstar have more than 70 per cent of the market, while smaller rival Regional Express is expanding its capital city network to include Melbourne-Brisbane flights.
Before Virgin had returned to profitability, Virgin Australia had reported a $386.7m loss for the year to June 30, 2022.
But Ms Hrdlicka has said Virgin’s balance sheet was strong as the company continued work on its transformation.
Goldman Sachs advised Bain on the purchase of Virgin Australia.
Working as an adviser to Virgin Australia to select the banks is Reunion Capital headed by former Goldman Sachs executives.
UBS was previously Virgin’s adviser before it collapsed, so it knows the airline well, while Morgan Stanley worked on its restructure and was also expected early on to win a role.
However, the understanding is that Morgan Stanley was hesitant to participate in a recapitalisation of the airline.
There had been some talk of a fourth bank in recent days to potentially assist with financing.
Barrenjoey was considered the wild card in the contest to win a mandate floating Virgin Australia.
Within Barrenjoey’s ranks are top former executives at UBS, including its former Australia boss Matthew Grounds, so would likely to have leveraged their long-standing relationship with the carrier to win the business.
Advisers are expected to waste no time now that they have been appointed, with early investor meetings potentially underway in March, straight after reporting season ends.
Peter Warne and Goldman’s banker Pippa Downes have been named as Virgin board members.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout