Virgin Australia’s planned IPO and relisting on the Australian stock market comes under a cloud amid the current world banking turmoil. A few hours ago, the Australian newspaper reported that the float could be pushed back by six months or more from a possible June bid.
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The report, which appeared on The Australians’ website, quoted Investors mutual fund manager Anton Tagliaferro as saying global banking turmoil and stock market volatility could force a delay. He added:
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“We are in a period of instability and we are seeing cracks in the financial system. In a bullish market they may have sold Virgin at a decent price but today will be difficult.”
Photo: Virgin Australia
As Simple Flying reported last week, Bain Capital (Bain), the owners of Virgin Australia (VA), bankers Goldman Sachs, UBS and Australian consulting firm Barrenjoey have hired to prepare for the initial public offering (IPO). Her task was to report on the best timing, structure and metrics to return VA to the Australian Stock Exchange (ASX).
Initial soundings indicated that VA would like to raise at least A$1 billion ($667 million) and target an equity valuation of at least A$3 billion ($2 billion) for the listing. This could be at the top of the range as VA reportedly posted underlying losses of A$77 million ($51 million) in 2021 and A$387 million ($258 million) in FY21/2022.
Much like Qantas, VA has made good use of its capacity to maximize passenger numbers and keep ticket prices high. Airlines stocks were popular again after Qantas announced its A$1.43 billion ($952 million) half-year profit in February, which may have hastened Bain’s moves to list the airline. VA was estimated to have made A$2.5bn ($1.67bn) in revenue for the first half of 2021/22, of which it earned an estimated A$125m ($83m).
Photo: Boeing
With the financial administration and the pandemic behind it, VA is rebuilding its Boeing 737 fleet, which currently numbers around 81 aircraft. The airline has 75 737-800s and seven 737-700s, with eight 737 MAX 8s planned to join the fleet this year. It also has 25 Boeing 737 MAX 10s due to arrive in 2024, although actual delivery depends on the MAX 10’s progress through certification and entry into service.
A quick and profitable turnaround for Bain Capital
Timing is everything in these IPOs, and Bain must now decide whether VA’s appeal is enough to weather the financial instability and specter of rising interest rates and deliver the desired yield. Things have been moving for over a year, and last week VA CEO Jayne Hrdlicka led a team that came to Singapore to launch a global investor roadshow.
Photo: Virgin Australia
Their aim is to convince investors of VA and its future, with further presentations planned in Hong Kong, London, Boston and Los Angeles before making the rounds again in Australia. For Bain, it’s about maximizing repayment of the AU$3.5 billion (US$2.33 billion) spent to pull VA out of administration, a process similar to US Chapter 11.
The Australian reports that Bain has equity of A$731 million ($488 million) and VA, with Richard Branson and the Queensland Government’s shares, has a market value of around A$1 billion.
The VA roadshow is sure to continue with confidence around the globe and it appears that Bain will see a very strong return on its investment. As I wrote last week, all that remains to be decided is when and how Bain will cash in its chips and how many it will keep for itself. The time will tell.
What are your thoughts on the future of Virgin Australia? Tell us in the comments.
Source: The Australian
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