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Richard Branson to sell $400m of shares in Virgin Galactic to help Virgin Atlantic survive

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A new twist has emerged in the battle to keep Virgin Atlantic afloat, as Virgin Group has announced that its Vieco investment vehicle is selling up to 25 million shares in Virgin Galactic.  These are worth $505 million at the current price.

20% of this money belongs to Branson’s partners in Vieco, Abu Dhabi’s sovereign wealth fund, leaving Virgin Group with $400 million to distribute.

In a statement, Virgin Galactic said that Sir Richard Branson would use the money to (see page 174 of this SEC filing)

“support its portfolio of global leisure, holiday and travel businesses that have been affected by the unprecedented impact of COVID-19.”

Branson had already committed an additional $250 million to Virgin Group companies on 20th April.

Whilst Virgin Atlantic will likely be the largest recipient of the proceeds it is unlikely to keep it all.

Virgin Group has other headaches, most noticeably Virgin Voyages.  The new cruise line has three vessels on order, of which one has been delivered, and has had to pospone its maiden season.  There may also be funding requirements at Virgin Hotels and Branson’s other hotel assets, as well as potentially any reborn Virgin Australia.

Shares in Virgin Galactic have doubled in price since the company’s IPO on the New York Stock Exchange late last year.  Despite never having generated any profit, the venture has been a huge success for Virgin Group.  Virgin Galactic reportedly has about 600 customer reservations on its books, with the majority of tickets sold for between $200,000 and $250,000 per person.

Adjusted for the Abu Dhabi minority, Branson owns approximately 44% of Virgin Galactic and the 25m shares he intends to sell represent just under a quarter of his stake.

Richard Branson to sell $400m of shares in Virgin Galactic to help Virgin Atlantic survive

By selling a stake in Virgin Galactic, Virgin Group is once again proving to the UK Government that it is doing all it can to secure Virgin Atlantic’s future on commercial terms before it relies on a Government-backed loan.

With Delta Air Lines blocked from future investment due to the terms of its own bailout by the US Government, there are only two realistic options for Virgin Atlantic.

The first would be a massive rights issue, with a huge number of new shares issued.  Virgin Group would invest alongside new institutional investors, and Delta would see its shareholding diluted to virtually nothing.  It is possible that a Government-backed loan could be introduced as well since the new equity should improve the credit quality of the group.

The second option would be, as we discussed at the weekend, a pre-pack administration.  This would see the airline put into receivership and immediately bought back by a new investor group for £1 together with a large injection of additional funding. 

It would rid the group of its existing debt and lease commitments, but there are issues over whether the Heathrow slot portfolio – which is mortgaged – would be lost.  All of the suppliers to the airline would also lose any money they are owed. It is hard to imagine the UK Government lending to this, as it would implicitly be encouraging businesses to go into administration in order to secure suppport.

In any event selling a stake in Virgin Galactic, together with the airline’s proposals to restructure and make 3,000 staff redundant, suggests that Virgin Group is reluctant to let the airline fail and it is a step in the right direction to ensuring its future.

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Comments (32)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Simon says:

    Waiting for the RB bashers to somehow find fault with this. Not enough? Should have done it sooner? Won’t pay CGT as not resident in the UK? Publicity stunt?

    • Ken says:

      Hardly – it’s what most so called bashers wanted. Raise and put in some money before putting the begging bowl out to the taxpayer.

      I do wonder if it will be enough on its own though – probably needs some external investors with deep pockets as well.

      • Simon says:

        Agree to a point but every company is currently doing what it can to survive. Being a director of a large company you are charged with doing the best for the company.

        This is exactly what BA did with their timing on redundancies and ballout, virgin/RB with their application for credit, Wizzair taking a cheap loan they don’t really need just to replace more expensive debt, easyJet looking to cancel orders and get a cash injection despite the shareholders getting some £150m a few months ago. It’s what businesses do.

        And I wonder how many people in RB’s position would choose to stay a UK resident, allbeit with a nice house wherever you want in the UK, and pay full UK taxes Or would they live in the Caribbean with a far lower rate of taxation? Easy to moralise when you will never have to make the decision.

        • Alex W says:

          Totally agree. If I got hit with a huge tax hike or had to give up a large percentage of my (very modest) assets then I would have to seriously consider moving somewhere cheaper.

      • Oh! Matron! says:

        Ken, did you miss how IAG has already gone with its “begging bowl”?

        • AJA says:

          BA did the same thing anything that the other airlines, including Virgin would have done if it could have. Wizz Air didn’t need the cash but as others acknowledged it is cheap money going begging so why wouldn’t they? Virgin just didn’t qualify so the actions it’s doing now seem sensible. It’s also proven that there was more they could do before relying on a bailout. That’s reasonable as that’s how it should work. Relying on UK taxpayers should not be the default position of struggling businesses.

          • Simon Barlow says:

            Agree, should be last resort, but if you could get it before trying other options, you would, wouldn’t you! I know I would!

    • marcw says:

      As long as it is not taxpayers money, private investor can do with their money whatever they want. No objection in RB pumping cash into VS. My objection has been pumping taxpayers money into companies that will never pay it back. We all know how fragile VS financial situation is.

      • James says:

        It’s a loan.

        • Kruggs says:

          yes – but i think the point was that a loan doesn’t get paid back if you go bankrupt!

      • Rob says:

        It’s not your money though, as you’re not in the UK!

        • marcw says:

          The principle remains valid Rob. Even though now I don’t live in the UK, I lived and worked there for 7 years.

  • TripRep says:

    Trying to cancel VS Florida flights for this autumn/winter, how long are folks having to wait for a reply from the txt service.?

    • Pat the Postie says:

      Wait 5 days and then a reply at 3am and closed at 3.20am at least 3 times I waited 5 days, if you phone you can get through in an hour

    • Oh! Matron! says:

      I’ve had much better luck with the whatsapp service

    • Rob says:

      3-4 days seems about right.

    • NickAnon says:

      Yes, 3 or 4 days. I wouldn’t bother though, the only messages I got told me to wait until 72 hours before departure! I had success with DM on twitter though, it took a couple of days between messages, but when I eventually demanded a refund it took 5 days for a reply that said it is being processed.
      No mention of how long it will take though, is it really 90 days?
      Any quicker for miles refund?

    • TripRep says:

      Finally managed to get through after an hour on hold.

      Miles refunded immediately, cash element takes a few weeks as obviously they are dealing with 100’s of thousands of claims. Just a £30 / pax admin fee to pay. The PE upgrade voucher gets credited back to my a/c too.

      Feels weird cancelling a PE and much cherished Upper Class redemption, was eager to check out the new Manchester clubhouse too. Hopefully will be able to experience it all in late 2021.

      • NickAnon says:

        Ah, I assume that as I requested a refund because Virgin cancelled, that the miles will take a long time (and the money) to get refunded. As you cancelled yourself, you get the miles back quick.

  • pauldb says:

    Even if the Vieco JV is doing the selling, all the money can go to Virgin if the continuing Vieco is rebalanced between Virgin and Abu Dhabi. Just depends if Abu Dhabi are wanting to take some money out too.

  • mr_jetlag says:

    This is a good move by Branson and the Virgin Group. Can’t say I’m sad about Delta getting diluted – they had to know it was going to come to this when they refused to assist the business in any meaningful way.

    • Rob says:

      They are not allowed to help as per the terms of their US Government bailout.

      • mr_jetlag says:

        Yep, and equally they ruled out assistance to LATAM et al. Just saying (as I did when we started discussing this a few weeks ago) the rational thing was always to refinance / issue more shares to generate more cash if Branson wanted to avoid administration. I’m just surprised VG / Vieco is worth so much at this point given wider aviation troubles.

        Would be interesting if they did go into administration to dive into the docs similar to what you and a reader did for Flybe – although probably only to me, LL and a dozen other readers…

    • Kruggs says:

      If they don’t go through administration, would the rumoured $200m still be owed to Delta?

      • mr_jetlag says:

        Yes. Even in administration, if it was secured debt they would have a claim on any assets Virgin has to repay the debts ahead of unsecured creditors.

  • Nadeshka says:

    If they go down the pre pack administration, what happens to those of us still waiting for refunds from holidays that have been cancelled?
    I presume we get lumped with other creditors and need to use S75 to get our money back? That might actually be quicker…

  • davvero says:

    Would anyone want to buy Virgin Galactic? It seems like a vanity project that’s going nowhere fast.

    Fortunately Boris is no longer Mayor of London or he’d have bought it and integrated it into TfL

    • Rhys says:

      Given the stocks have doubled in price since their IPO someone clearly disagrees with you!

    • mr_jetlag says:

      in space no one can hear you cough…

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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