Investors Eyeing Virgin Australia IPO

Budrigannews.com – On Monday, Bain Capital announced that it is considering relisting Virgin Australia, a move that would coincide with the strong recovery of the domestic aviation market from pandemic lows.

After capital markets activity dropped last year due to global financial market uncertainty, a listing of Australia’s second-largest airline would likely be one of the largest IPOs in the country in 2023.

In a statement, Mike Murphy, a partner at the US private equity firm based in Sydney, said, “In the coming months we will consider how to best position Virgin Australia for continued growth and long-term prosperity.”

“It is Bain Capital’s current intention to keep a significant shareholding in a Virgin Australia IPO in the future,”

Bain stated that it would seek advice on the best structure and timing for the airline’s return to the Australian Securities Exchange, but that no decisions had been made regarding when or if that would occur.

Two people with direct knowledge of the situation, who declined to be identified because they were not authorized to speak with the media, stated that it sent a request for proposals on the listing to investment banks on Monday and anticipates making appointments within a month.

According to the individuals, the deal has been assigned to the boutique firm Reunion Capital, which will act as a financial advisor and oversee the selection of investment banks to lead the IPO.

One of the people stated that one of the questions banks pitching for a role on the IPO will be asked to address is the size of the stake that Bain Capital ought to retain. This is one of the questions banks will be asked to answer in terms of forecasting how much demand there might be for the deal.

Bain Capital declined to discuss that aspect.

In Australia, private equity-led initial public offerings (IPOs) have typically seen these companies sell at least 50% of their stakes to provide investors with liquidity.

After the airline was put into voluntary administration in 2020, Bain purchased Virgin Australia for 2.45 billion Australian dollars ($3.5 billion), including liabilities. In September 2020, the buyout was approved by creditors.

Before the pandemic decimated global travel, Virgin, which has about a third of the domestic aviation market dominated by Qantas Airways Ltd., had reported seven consecutive annual losses.

A board that included representatives from five foreign investors, including airlines that controlled more than 90% of the company and were reluctant to inject new capital at the beginning of the pandemic because their own businesses were suffering, frequently stymied efforts to turn the airline around.

Since then, as a result of the reopening of Australia’s state and international borders, the aviation market has seen significant improvement. Additionally, Virgin has rebuilt its Boeing (NYSE:). Co 737 fleet to about the same size it was before the pandemic, and it closed its international and budget divisions, which had been losing money.

Qantas is poised to report a first-half underlying profit of A$1.35 billion to A$1.45 billion next month, a significant improvement from the A$1.28 billion underlying loss before tax the previous year.

According to data compiled by Refinitiv, the value of IPOs in Australia in 2022 was just $614,2 million, a decrease of nearly 93% from the $8.4 billion that had been raised the previous year.

Since interest rates in the majority of major markets are anticipated to soon reach their peak and there are indications that inflation is beginning to moderate, bankers believe that IPO markets will improve in 2023.

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