As Virgin Australia Prepares to Go Public, Sources Confirm the Company Is Actively Exploring Debt Financing Options

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Virgin Australia Airlines Pty Ltd. is exploring the possibility of raising new debt to give Bain Capital, its owner, cash before its plans for an Initial Public Offering (IPO), according to sources knowledgeable about the matter.

Considering a potential dividend recapitalisation before their Initial Public Offering (IPO), Virgin, the nation’s second-largest carrier, has requested investment banks for guidance. 

As per sources familiar with the confidential talks, Virgin would take this action by issuing debt ahead of a potential IPO, with the money raised going toward paying dividends to Bain.

After assessing a variety of investment banks in recent weeks, the company is now looking to select three to four underwriters within the next few weeks who would manage their potential IPO this year.

To evaluate the potential investor interest, the airline estimates a net profit after tax of approximately A$400 million ($277 million) for its 2023 financial year, according to people who know the matter.

It is anticipated that the business will be worth an earnings multiple comparable to Qantas Airways Ltd., Australia’s leading airline.

As conversations remain ongoing, there is currently no assurance that Virgin and Bain will move forward with either the recapitalisation or the IPO, according to people familiar with the matter.

Bain Capital, as previously stated, is currently evaluating the various possibilities concerning Virgin Australia’s capital structure, and no definite resolutions have been taken yet. A spokesman for Bain Capital maintained this position in his most recent statement.

When asked about the company’s financial standing and the timing of a potential IPO, the spokesman declined to elaborate. 

When presented with questions regarding any debt-financing plans associated with Virgin Australia, Bain’s spokesperson deflected those queries while refusing to offer any additional comments.

Virgin Australia is now focused on keeping hold of one-third of the domestic passenger market and short-haul flights to destinations such as New Zealand“, Chief Executive Officer Jayne Hrdlicka said in September.

In 2020, the airline’s A$6.8 billion debt was too much for them to handle, and Bain had to come in with a rescue plan; their A$3.5 billion deal cancelled out most unsecured creditors’ claims.

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