CANBERRA: Virgin Australia has secured a 12-month, $425 million loan facility with its four major airline shareholders, while it considers future funding options. The airline says it is undertaking a review into its capital structure to provide cheaper and more flexible access to funds, and improve its cash flow generation and profitability.
While the review is underway, Virgin Australia’s major shareholders – Air New Zealand, Etihad Airways, Singapore Airlines and Virgin Group – have agreed to provide access to $425 million in loans.
These airlines will contribute to the loan facility in proportion to the size of their shareholding. Currently, Air New Zealand owns just under 26 per cent of Virgin Australia, Etihad 24 per cent, Singapore Airlines almost 23 per cent and Virgin Group 10 per cent.
The new loan will rank behind Virgin Australia’s existing debt and the airline said it is on arm’s length commercial terms with its shareholders. Virgin Australia said it has had a very successful transition over the past five years from being a low-cost carrier to a diversified airline group.
The company’s chief executive John Borghetti said now is an appropriate time to review its mix of debt and equity funding, as well as considering new operational initiatives.
“Having achieved a significant transformation in the last five years, the Virgin Australia Group is now well placed to deliver ongoing growth and choice to Australian travellers,” he said in a statement to the ASX. “One of the key pillars of our ‘Virgin Vision’ strategy is to optimise the group’s balance sheet, and the group has had an ongoing program in place to achieve this goal.”
