UK’s Virgin Atlantic looking to go public

Virgin Atlantic (VS, London Heathrow) is planning to go public after its institutional investors responded positively to the management’s overtures.

Sources familiar with developments told SKY News that an announcement on an IPO could be made later this autumn with a listing to take place on the London Stock Exchange. Citi and Barclays have been hired to oversee the listing, they said.

The UK carrier is currently split 51/49 between Virgin Group and Delta Air Lines (DL, Atlanta Hartsfield Jackson). As such, the number of shares to be offered up to investors has yet to be determined.

According to the sources, although Virgin Atlantic is not in urgent need of new funding, with adequate financing in place to see it through the next few months, a listing would provide it with other opportunities to raise cash in future should the need arise.

Virgin Atlantic declined to comment on what it called “speculation” when contacted by ch-aviation for comment.

While, like other carriers across the globe, Virgin has suffered greatly as a result of the COVID-19 pandemic, it is pinning its hopes on pent-up international travel demand and it is this angle its executives are hoping to leverage as part of the IPO.

To help it survive the crisis, Virgin Atlantic secured a privately funded, solvent recapitalisation in September 2020 which will deliver a refinancing package worth around GBP1.2 billion pounds (USD1.67 billion) to come through March 2022.

Of that, Virgin Group and Delta are providing around GBP600 million (USD833 million) in support over the life of the plan including a GBP200 million (USD278 million) investment from Virgin Group and the deferral of around GBP400 million (USD555 million) of shareholder payments such as brand fees and JV-related costs. In addition, Davidson Kempner provided GBP170 million (USD236 million) of secured financing while Virgin’s largest suppliers contributed an additional GBP450 million (USD624 million) by way of deferrals. Earlier this year, it had to raise around GBP300 million (USD416 million) in additional capital via the sale/lease-back of two B787-9s and the securing of a loan from Virgin Group.

A reduction in cost base and the simplification of both its fleet and network delivered GBP335 million (USD465 million) in cost savings in 2020 (with over GBP200 million (USD278 million) of recurring cost reductions).

According to its last published financials, as at February 28, 2021, Virgin Atlantic and its subsidiary companies had total cash balances of GBP194 million (USD269 million) (including unrestricted cash of GBP104 million (USD144 million)).