MAJOR SHAREHOLDERS BACK VIRGIN'S BID TO RAISE $852M
Written on the 15 June 2016
VIRGIN Australia (ASX:VAH) has launched a bid to raise $852 million in equity as it overhauls the business to reduce debt.
The 1 for 1 entitlement offer at 20 cents a share has been backed by shareholders Singapore Airlines, Nanshan Group, Air New Zealand, HNA Innovation and Virgin Group.
The proposed offer combined with the placement to HNA last month is set to raise more than $1 billion in capital for the airline.
Virgin will also introduce a corporate restructure to improve its capital position and free up $300 million a year by the end of FY19.
The airline will consolidate its fleet by reducing the number of ATR aircraft and removing all E190 aircraft to optimise the network.
Crew and ground staff operations will also be streamlined, while procurement and supply contracts will be reviewed.
Virgin Australia Group CEO John Borghetti (pictured) says the company will be able to deliver sustainable growth following the restructure.
"Our renewed capital structure will strengthen our balance sheet, provide additional liquidity and help fund initiatives to improve earnings and cash flow," Borghetti says.
"Additionally, the new program of operational and capital efficiency initiatives will further deepen our focus on having a low, sustainable cost base.
"Going forward, we will continue to stay focused on delivering an excellent customer experience to travellers in Australia and around the world."
Shares in Virgin tumbled as much as 13 per cent to 26 cents apiece following the announcement.