Virgin seeking $1.4bn bailout., page-101

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Artvandelay01

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07/04/20

19:13

Post #: 43935657
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Originally posted by Artvandelay01: ↑

Can history teach us anything? I stumbled onto this article and thought it was worth a share:

https://australianaviation.com.au/2019/09/from-the-archives-the-ansett-collapse/

I was in my early teens when Ansett collapsed so wasn’t really aware of the extent of the fall out. It’s sobering though to read that 30 Ansett employees committed suicide in connection with the collapse, especially when taking into account Australia’s current death toll of 48 people due to COVID-19 (see also: https://www.theage.com.au/national/hidden-toll-of-ansetts-collapse-20041114-gdyzpd.html)

I’ve been through a VA process myself, and it was really messy and expensive although it did save the business and most employees retained their jobs. However, Virgin is an order of magnitude larger, and the market dynamic is much more complex so I don’t think that is the right approach here. Nor do I think the Australian government should subsidise a company with a track record of poor management and wealth destruction. If existing shareholders and debt holders are unwilling to recapitalise the business, then I’d be supportive of the Australian government providing a senior secured loan on the basis that the debt holders agree to convert their debt into equity and/or take a significant hair cut to remove the company’s debt burden. Absent significant changes to the company’s capital structure, any government support is only likely to kick the can down the road.

All IMO - DYOR etc

Cheers

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To clarify - in the scenario above, if VAH is unable to repay the Govt’s senior secured loan after an agreed (reasonable) term it should be convertible into equity at a punitive discount such that the Govt would become the majority shareholder of the business. They could then be diluted/sell down over time in an orderly manner

VAH Price at posting: 8.1¢ Sentiment: None Disclosure: Not Held
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0 Great analysis

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Virgin seeking $1.4bn bailout., page-101

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