Virgin Australia: Trading Halt

This morning saw an announcement from the Australian Securities Exchange that Virgin Australia Holdings Ltd, the company behind Virgin Australia had requested a trading halt.

The halt will run until there is an announcment to the market or the commencement of trading on Thursday 16 April 2020 – whichever is the sooner.

The company issued statement in part states:

‘Virgin Australia has requested a trading halt as it continues to consider ongoing issues with respect to financial assistance and restructuring alternatives.

‘This has arisen due to the unprecedented COVID-19 crisis which has particularly impacted the aviation sector.’

While Virgin has been calling on the Australian Government for a loan to the tune of AU$1.4 billion, it hasn’t put all its eggs in one basket. Apparently it has appointed Houlihan Lokey, an American investment bank to devise a restructure for its approx. AU$5 billion debt load.

Virgin Australia has some options:

• Offer debt for equity swap to creditors, although with its market value being only AU$726 – that would tend to knock off the stake its current shareholders have
• Request more capital from its current shareholders which include Singapore Airlines, Etihad Airways, conglomerates HNA and Nanshan, and the Virgin Group
• Other options completely in the realm of the arcane refinancing arts

With only about AU$900 in the bank, and essentially no income (they are only running one aircraft at the moment), their piggy bank will be empty in under six months, and that could be well before travel restrictions are removed.

2PAXfly Takeout

No one except Qantas wants Virgin Australia to fail. If they do, Alan Joyce the Qantas CEO will figuratively be rubbing his hands at the prospects of mega earnings as a monopoly domestic airline post-COVID-19 travel restrictions. So between the government and the finance industry, they should be able to come up with a plan. What it exactly will be, remains to be seen. Roll on Thursday 16 April.

If they don’t, we the traveling public will be paying for it through humungous airfares.