Virgin Australia’s four biggest shareholders have declined the chance to pour in extra funds to recapitalise the business after the troubled airline entered a trading halt on Wednesday.
According to the The Australian Financial Review, Etihad, Singapore, Nanshan Group and HNA Group have all opted out of helping, with the search now extending to outside investors. The Guardian even speculated that one of the options on the table is administration.
Virgin Australia Group is struggling to service its $4.8 billion debt pile with little revenue coming in, and is currently attempting to secure a $1.4 billion government loan to help it survive during the coronavirus crisis. The trading halt is scheduled to end on Thursday morning.
The AFR report states the four big shareholders, who own 80 per cent, declined to help, but a fifth, Sir Richard Branson’s Virgin Group, was a “maybe”.
Meanwhile, The Guardian speculated that Virgin Australia is considering entering administration in order to force all creditors to take a haircut under a deed of company arrangement.
The move would also allow it to disclaim uneconomical contracts, thereby freeing the company from its more onerous obligations.
However, to succeed, a deed of company arrangement would require support from 50 per cent of its creditors by amount owed and number.
The dash to find extra funding comes after the company announced it was suspending all regular commercial flights, bar services between Sydney and Melbourne, just before the Easter weekend.
Labor leader Anthony Albanese has thrown his weight behind a government package, arguing the idea that another airline could quickly take over from Virgin was “frankly a fantasy”.
He told the government to “stop the bits and pieces support and provide support for our airline industry”, indicating his preference for the government to obtain equity, rather than merely issuing a loan.
“There’s no reason why a government could not make a financial injection through equity and that to be sold down the track,” he added. “What we know is at the moment … this is an ideal time, if anything this is the bottom of the market.”
In a statement to the ASX, Virgin Australia said it had requested a halt “as it continues to consider ongoing issues with respect to financial assistance and restructuring alternatives”.
The Sydney Morning Herald later reported the airline had appointed American investment bank Houlihan Lokey to try and restructure its debt load.
The airline has already stood down 8,000 employees since the coronavirus crisis took hold and its lobbying push for aid has included placing a full-page advert in The Daily Telegraph warning of the dangers of a Qantas monopoly.
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