Virgin Australia in $350 million cash call
Virgin Australia’s three major shareholders – Air New Zealand, Etihad and Singapore Airlines – will underwrite the carrier’s A$350 million capital raising, announced today.
Australia’s second-largest airline will issue almost 925 million shares at 38 cents a piece, which it says will strengthen its balance sheet significantly.
Air New Zealand said the rights issue "will further strengthen Virgin Australia as it consolidates and builds its position in the Australian domestic and international airline markets".
Air New Zealand currently holds 22.9% of Virgin Australia shares and has regulatory approval in Australia to increase that to 25.99%.
The company will take up its full pro rata entitlement under the rights issue and could see its shareholding increase to as much as 25.5%.
Air New Zealand chief Christopher Luxon said the company had been impressed "by the ability of Virgin and its executive team to quickly and successfully undertake a major strategy shift to become a much more effective competitor".
"We have endorsed that strategy from the time of our initial investment in 2011."
Commonwealth Bank analyst Matt Crowe told Fairfax the rights issue highlighted the tough conditions Virgin and its competitors faced in the market due to over capacity.
”The aviation market is just terrible,” he said.
Singapore Airlines has a 20% stake in Virgin Australia, while Etihad has 19% and Richard Branson’s Virgin Group 10%.
Ian Jarrett
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