Richard Branson mulls putting up more cash to tap UK loans for teetering Virgin Atlantic

Richard Branson is considering pouring more money into teetering Virgin Atlantic Airways than he originally pledged in a bid to attract outside investors
Richard Branson mulls putting up more cash to tap UK loans for teetering Virgin Atlantic
Richard Branson is looking at ploughing more money into teetering Virgin Atlantic to avail of British government loans.
Richard Branson is looking at ploughing more money into teetering Virgin Atlantic to avail of British government loans.

Richard Branson is considering pouring more money into teetering Virgin Atlantic Airways than he originally pledged in a bid to attract outside investors and gain access to hundreds of millions of pounds of UK state-backed loans, according to people familiar with the matter.

Mr Branson had earlier said he would channel the bulk of a $250m (€230m) infusion into his Virgin-branded companies towards the UK airline.

The pledge, linked to a request for some £500m (€570m) in UK funding guarantees, has met with resistance from the British government.

The talks and amounts are in flux, said the sources. US partner Delta Air has said it won’t put in more money, and raised the possibility Virgin Atlantic could go through insolvency proceedings.

Mr Branson has been pursuing outside investors to strengthen the bailout application. The 69-year-old billionaire’s Virgin Group is seeking some combination of structured finance, convertible bonds or preferred debt, according to one of the sources.

An injection of pure equity could also be part of the mix, though rules governing airline ownership could place limits on that option.

About 100 financial investors have been contacted with around half responding, the source said.

Mr Branson himself “has no intention of selling out” of Virgin Atlantic, said Nick Fox, a spokesman for Virgin Group. He declined to comment on the investor search or what form support might take.

Virgin previously confirmed that Houlihan Lokey had been engaged to lead the search.

The future of Mr Branson’s flagship business is on the line as airlines worldwide are roiled by the Covid-19 outbreak.

Like other European carriers, Virgin Atlantic has grounded almost all of the fleet, while slashing costs through a deal with staff to take unpaid leave.

That step and question marks over Mr Branson’s tax affairs have led to a backlash against a bailout from some UK politicians. His Virgin Australia line was already denied a rescue and faces collapse.

Mr Branson, who founded the airline in 1984 and owns a 51% stake, would remain a leading shareholder, the sources said. Delta’s 49% stake would likely go down.

London’s Telegraph newspaper reported earlier that Mr Branson was seeking a buyer for Virgin Atlantic, something his spokesman disputed.

“Richard is committed to investing in Virgin Atlantic,” said Mr Fox. “He and Virgin Group are fully supportive of the process the airline is going through in seeking prospective investors.”

With the airline industry in such dire straits, a new backer would be investing on the strength of Mr Branson’s plans for the carrier, said one source.

The tycoon last year came close to selling 30% of Virgin Atlantic to ally Air France-KLM before pulling the plan as earnings surged.

While Virgin Atlantic and its adviser have reached out to potential investors including private equity firms and sovereign wealth funds to gauge interest, some have been reluctant to risk putting money into the battered airline sector, sources said.

Among investment options, Virgin Atlantic could issue bonds convertible into stock after five years if not repaid, said a source.

The institutions expressing an interest in Virgin will be provided with insight into two- and five-year plans for the airline after signing non-disclosure agreements, according to another person.

While Delta won’t provide direct investment while itself seeking federal funding, the US carrier may be able to help indirectly in the longer term.

That could include deferring payments related to a joint venture between the airlines and others for a booking platform, one of the people said.

Mr Branson has already said he’s seeking to raise cash against his Necker Island home in the British Virgin Islands.

Most of that money will likely go to help his other leisure businesses, the source said.

The search for a new investor may be complicated by airline ownership rules.

Christopher Jasper, Bloomberg

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