While
Virgin Australia is yet to call in any restructuring experts, many believe it faces an uphill battle in the coming months and may ultimately wind up subject to a bail out by its major shareholders, including Singapore Airlines, if the Australian Government does not first provide assistance.
The level of government involvement is also a critical question for the country’s national carrier Qantas, which may need to resort to an emergency equity raising.
Qantas currently has a market value of $4.5bn, with the group’s shares moving from around $7.40 at the start of the year to about $2.92 in Tuesday afternoon trade.
At its half-year results, it said it had net debt of $5.3bn.
Equity capital markets specialists say that securing investor support for an equity raising currently revolves around selling the deal as one that will see the company return to a strong performance when the coronavirus concerns ease and offering adequate information about exactly how much funding is needed to be the case.
It comes as the
Virgin Australia listed bonds on Tuesday afternoon were trading at $38 after investors paid $100 each for the bonds last year.
Virgin Australia is buckling under adjusted net debt of $5bn and for the half year it posted an $88.6m loss.
Investment bank UBS assisted
Virgin Australia last year on its bond raising, which secured $325m to help pay for its $700m acquisition of the remaining 35 per cent stake in the Velocity frequent-flyer program that it did not own.
A challenge for Virgin remains the fixed costs it has for operational leases and asset finance on its aircraft.