Virgin gets its money for new Embraers

A report in The Herald Sun says that the global credit crackdown is not hindering Virgin Blue’s efforts to raise almost $US2 billion ($A2.4 billion) to finance new aircraft, with over the past two weeks the airline raising $US589.55 million, including $US300 million from Asia.

With the ink barely dry on the loan papers, Virgin Blue last week issued tender documents seeking an additional $1 billion to pay for a separate fleet of Boeing 777 aircraft which will be used on flights to the United States next year.

The first loan, based on a 12-year term and reverting to zero, is priced at an attractive rate of 0.5 per cent above the benchmark for 90-day bank bills.

It is being used to fund 17 of the 20 Brazilian-built Embraer jets Virgin will use across its Australian route network as well as four Boeing 737s which are being added to airline’s existing fleet of 53 aicraft.

The funds were advanced by a syndicate of 12 international lenders co-ordinated by Dutch bank ING, with ANZ Investment Bank and HSH Nordbank Singapore as lead arrangers and bookrunners.

Keith Neate, Virgin’s chief financial officer, is similarly confident he will be able raise the $1 billion Virgin needs to pay for six of seven Boeing 777s.

Details of the airline’s fundraising activities emerged during the handover in Brazil last week of the first of the Embraers, a 78-seat E170 twin-jet.

Responding to questions, Mr Neate said there had been no discussion of any tightening of global credit lines during the carrier’s talks with the banks.

“What we obtained was asset backed and the banks were offered a fantastic asset,” Mr Neate said, noting how the first loan for the Embraers and 737s was oversubscribed at the sub-underwriting phase resulting in offers totalling $800 million.

As a result, the allocations were scaled back and the offer did not go to general syndication.

“The market was aware we were acquiring the Embraers and we received a number of unsolicited offers,” Mr Neate told BusinessDaily.

“Two of the offers, one from ING and another from a second bank were too good not to pursue.”

Among the lead lenders are the Singapore-based Oversea-Chinese Banking Corp, which contributed $US60 million, and Industrial and Commercial Bank of China, with $US35 million.

ANZ, HSH Nordbank Singapore, Commerzbank Singapore and DBS Bank each contributed $US60 million while another five banks tipped in amounts ranging from $US23 million to $US56 million.

Mr Neate said other Chinese banks had been keen to participate, but could not complete their offers in the time the syndicate allowed.

Belle-lissimo Blue, the first of Virgin’s new Embraers, left the factory at San Jose dos Campos, north of Sao Paulo, last Tuesday on a six-day ferry flight to Australia.

Two others, due to be delivered this year, are in various stages of construction, with Belle-lissimo Blue due to make its Australian landfall in Cairns tomorrow and showcased in Canberra on Thursday, where Virgin has a black-tie dinner planned to show the plane to government and public service decision makers.

Canberra-Sydney, which Virgin abandoned because of losses, is one of the routes Virgin is looking at to introduce the plane.

Report by The Mole