UBS launches Virgin’s $852m cash call

UBS has invited minority shareholders to bid into an $852 million entitlement offer for Virgin Australia that received the backing of the airline’s major shareholders on June 15.

The deal has been priced at 21c, a 28.8 per cent discount to the last closing price prior to last month’s announcement, the BusinessNow blog reported earlier.

Virgin’s largest investors, Singapore Airlines, Virgin Group, HNA Group, Nanshan Group and Air New Zealand, have made binding commitments to take up their pro-rata entitlements under the offer.

Three of the biggest investors, including China’s HNA Group, which recently snapped up a 13 per cent stake in the airline at 30c per share, are also underwriting the deal, as are Singapore Airlines and Virgin Group.

HNA is targeting a 19.9 per cent stake in Virgin and if it fails to meet this target by participating in the offer as well as its role as a sub-underwriter, the group will hoover up a top-up placement priced at 26c per share, according to a termsheet sent to investors.

The entitlement offer opens on July 14 and the books are due to close on July 28.

In total Virgin will gather $1.01bn in fresh cash from the rights issue and placement to HNA, enabling the airline to fortify its balance sheet and pay down debt.