Big banks dodge Virgin turbulence
It’s one less thing for investors to worry about as ANZ (April 30), Westpac (May 4) and National Australia Bank (May 7) prepare to release their profit announcements for the March half-year.
While Virgin has gone into voluntary administration with $5bn in debt, much of it was held by US bondholders, aircraft owners and lessors, airport terminal owners, ordinary trade creditors and employees.
The combined exposure of the nation’s banks is of the order of several hundred million dollars.
In the financial crisis, the big four made a habit of going straight to the confessional when a large corporate client collapsed, even when their exposures were less than material.
The intention was to prevent “rumourtrage”, or benefiting from share-price volatility by spreading false rumours.
In November 2008, for example, the implosion of Eddy Groves’ childcare empire ABC Learning and Allco Finance Group on consecutive days triggered a spate of announcements detailing individual bank exposures.
While Virgin had commercial banking relationships, the airline’s demise prompted no such rush of ASX announcements, with none of the big four on the books as a term-debt provider.
Westpac was the transaction bank, but its role was limited to provision of credit card facilities, and Commonwealth Bank was part of a syndicate which leased two relatively new aircraft to the carrier - one for Tigerair and the other for the parent.
CBA agreed to defer repayments on the lease but the gesture was overtaken by more significant events.
It could have been much worse for the big four.
As one senior banker said: “It wasn’t confessional day for us on Tuesday.”
“We managed to dodge the first big one (from the CIVID-19 pandemic).”
gluyasr@theaustralian.com.au
Twitter: @gluyasr
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The failure of Virgin Australia, which is Australia Inc’s first major casualty from the COVID-19 crisis, will barely leave a scratch mark in the accounts of the major banks.