Bain Plans IPO For Virgin Next Year

TD Syndicated Partner

After buying Virgin Australia out of voluntary administration in November 2020, private equity firm Bain Capital is reportedly planning to list the company on Australia’s stock exchange in 2023.

Bain plans to wait until the COVID pandemic and the Omicron variant has passed before going public, according to a report in The Australian citing unnamed sources.

According to the sources, Bain may try to sell up to 50% of its Virgin Australia holdings, less than three years after purchasing the company for $3.5 billion.

According to a report from advisers in recent months, a float is expected to be further evaluated in mid-2022, with a planned IPO in 2023.

As a result of Virgin’s domestic capacity operating more normally in 2023, insiders suggest that prospective investors have a clearer idea of the airline’s earning potential.

Although no investment bank has been named yet, considering Goldman Sachs’ historical ties to Bain Capital, the US bank is expected to be involved in the acquisition.

On top of that, Virgin announced last month that the airline had made its first annual pre-tax profit in over a decade after it emerged from bankruptcy.

As a result, Virgin’s 2019-20 financial year results, which saw the company declare a $3 billion deficit, have improved significantly. After the sale of the airline to Bain, its administrators were able to wipe off $4.4 billion in creditors’ claims, resulting in the profit.

With the help of JobKeeper payments of $205 million, Virgin reduced its labour expenditures by half by the end of 2020 after laying off more than 3,000 employees and winding down Tiger Airways.

To put it another way, the year-to-date loss for Virgin was $76.8 million, a measure of Virgin’s financial success.

Excluded from this total are the more than $600 million in charges for loss adjustment and redundancy, the $110 million in administrative expenses incurred by Deloitte, as well as the fines and foreign exchange losses.

Virgin said it reduced its expenses by 70 percent in the year ending 30 June, despite revenue falling over 70 percent from $4.5 billion in 2019-20 to only $1.5 billion.

From 2019-20, domestic passenger and freight income dropped to $983.3 million by 30 June, while international sales dropped from $966.2 million to only $8 million.

Virgin’s regional operations increased revenues by 23% on a year-over-year basis to $215 million during the pandemic.

Following a 25 percent reduction in flight capacity for January and February due to the ongoing Omicron outbreak, Virgin has also put its recently restarted international service to Fiji on hold until further notice.

On Monday, the country passed one million COVID-19 cases, half of which were reported in the last week alone, according to a statement from the airline. Travel demand has declined as a result of the outbreak.

 

Source: Australian Aviation

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