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Virgin raises US$300 million through unsecured notes issue

written by | November 14, 2014
Virgin Australia had hit the debt markets to raise capital. (Virgin Australia)
Virgin Australia had hit the debt market to raise capital. (Virgin Australia)

Virgin Australia has tapped international debt markets to raise US$300 million through the issue of unsecured notes due to be repaid in 2019.

It was the first time Virgin had issued unsecured notes in international debt capital markets, the airline said on Friday.

“The net proceeds of this issue will be used to provide Virgin Australia with additional US dollar liquidity coverage and to meet future US dollar financing obligations,” Virgin said in a statement.


“Settlement of the transaction is expected to occur on or about 20 November 2014, subject to customary closing conditions.”

The move to boost Virgin’s balance sheet was flagged earlier in the week, when the two major global ratings agencies assigned the airline its first credit rating.

Credit ratings offer potential investors an assessment of the credit worthiness of a company. In simple terms the ratings give an indication of a company’s ability to pay back debt and the likelihood of default.

Standard and Poor’s (S&P) on November 10 gave Virgin a B+ long-term corporate credit rating, with a stable outlook, saying the airline had a “low, albeit improving, profit margin compared to global peers”.


“The stable outlook reflects our expectation that a more-benign competitive environment in the domestic market in fiscal 2015 should improve Virgin Aust’s earnings, compared to previous years’,” S&P credit analyst May Zhong said.

S&P assigned a B- rating to Virgin’s unsecured notes.

Meanwhile Moody’s assigned Virgin with a B2 rating, with the US$300 million unsecured notes issue receiving a B3 rating.

Moody’s said Virgin’s overall credit profile had been improving, “reflecting the significant progress the company has made in the Australian domestic market in becoming a sustainable competitor for Qantas on the mainline business”.

“Virgin has a solid liquidity profile, benefiting from the equity issuance in the first half of FY14 and the recently announced sale of a stake in its Velocity frequent flyer program,” Moody’s vice president and senior analyst Matthew Moore said on November 10.

Both ratings agencies have given Virgin a credit rating that is below investment grade. However, only a handful of airlines – including Alaska Airlines, Southwest Airlines and WestJet – around the world currently have an investment grade rating from one or both of the global credit ratings agencies.

Qantas had its credit rating lowered to below investment grade in December 2013.

In the past year, Virgin has raised A$350 million through a capital raising supported by three of its alliance partners Singapore Airlines, Air New Zealand and Etihad Airways. The chief executives of those three carriers have joined the Virgin board and will be standing for election at the company’s annual general meeting in Brisbane on November 19.

The carrier also received $336 million from the sale of its 35 per cent stake in the Velocity frequent flyer program to Affinity Partners, which was recently concluded.

It also conducted a US$732.6 million financing deal in October 2013, using 24 aircraft in its fleet as security.

The Australian Financial Review reported on Friday Goldman Sachs was the lead manager for the US$300 bond issue.

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  • James in Sydney


    Virgin has been selling some of its furniture for a while now. I hope John doesn’t take his personal indifference with Qantas management too far. Aviation is a finicky industry at best and Australia has seen what can happen when we let a few people make bad decisions with businesses that employ so many.

    It might be prudent for unions to keep an eye on what is happening in the boardroom and put some pressure on.

  • John


    I totally agree with James from Sydney.

    JB has got to start running Virgin in a manner so it makes a profit so it doesn’t have to go running to someone every 6 to 12 months for more money

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