Banks to steer Virgin’s bourse return

Bain Capital purchased Virgin Australia out of voluntary administration in 2020.

Bain Capital is set to appoint three investment banks to offer assistance with efforts to list Virgin Australia next year after the US-based buyout fund bought the carrier out of administration during the global pandemic in 2020.

DataRoom has learned that an initial public offering of Virgin Australia was a hot topic at a recent board meeting, where directors indicated that its private equity owners needed to capitalise on the profitability of the carrier and move swiftly on a float.

Almost certain to gain one of the roles, say numerous sources around the market, is investment bank Goldman Sachs.

It is also believed that Morgan Stanley is well placed to gain a mandate, while a third role is up for contention.

One view is that investment bank UBS could be a strong contender.

Bain may offer a role to one of its existing lenders for the carrier.

The Australian reported in 2021 that Bain Capital was weighing a move to return Virgin Australia to the Australian listed market, and DataRoom reported in January that the private equity firm was targeting 2023 for the listing.

Virgin has experienced bumper conditions as people resume travel in 2022 after spending almost two years constrained to their homes to stem the spread of Covid-19.

By 2023, the anticipation is that prospective investors in any float would have a clearer perspective on the earning horizon for the group, with more normal passenger demand returning and it being in a better position to forecast earnings.

Bain purchased Virgin out of voluntary administration in 2020 for $3.5bn after the Australian listed carrier stumbled at the onset of the global pandemic due to grounded aircraft and high debt levels.

Suggestions are that the Boston-based buyout fund will stage a partial exit from the airline to get some money back through the door, likely retaining between 50 and 60 per cent of the business.

The understanding is that Bain has not appointed any investment banks for a transaction, and a beauty parade for the selection is yet to take place.

Goldman Sachs advised Bain on the Virgin Australia purchase, while Morgan Stanley worked on the sale of the carrier when it was in voluntary administration.

Virgin is run by former Qantas and Jetstar executive Jayne Hrdlicka and has been targeting a 33 per cent share of the domestic market by increasing the frequency of flights and reach of its network.

Jetstar carries 23 per cent of all domestic passengers, while Qantas carried 39 per cent of passengers in July, compared with 33 per cent for Virgin and 5 per cent for Rex.

Recently, Bain Capital said that Virgin had returned to profitability after reporting a $386.7m loss for the year to June 30, 2022.

Ms Hrdlicka said Virgin’s balance sheet was strong as the company continued work on its transformation.