By Stuart Washington
Virgin Blue is poised to announce a significant capital raising, bolstering its balance sheet and cementing its relationship with its new joint venture partner Delta Airlines.
Virgin Blue shares entered a trading halt this morning after BusinessDay reported that the airline intends raising up to $400 million amid market speculation it would have to bring in a cornerstone investor to achieve the target.
This means that Richard Branson's Virgin Group, owner of a 25.5 per cent stake in the airline, would be unwilling or unable to participate in any capital raising.
The shares will remain in a trading halt until Wednesday unless the company makes an announcement earlier. Shares in Virgin remained unchanged at 30.5c this morning before the halt to trading was called.
Virgin today said reported details of the capital raising were incorrect and that its board of directors had not approved any such transaction.
"Given the prevailing macro-economic conditions, Virgin Blue Airlines Group assesses capital management initiatives as appropriate, however the board has not approved any such transaction as has been reported,'' Virgin Blue said in a statement to the ASX.
BusinessDay understands Goldman Sachs JBWere is playing a role in the capital raising, which is expected to be announced on Wednesday.
A spokeswoman for Goldman Sachs JBWere refused to comment, and a spokeswoman for Virgin Blue denied any relationship with Goldman Sachs JBWere.
"GSJBW are not appointed in any capacity to act for Virgin Blue, and this is why we continue to refrain from commenting on speculation," she said. "It ranges from Harry Potter imaginative to mischievous to just dead wrong and unvalidated, as in this case."
She refused to comment on questions about a capital raising or the potential timing of a capital raising. Virgin Blue's ability to make a capital raising of significant size has been called into question by analysts. Its market capitalisation is now at $324 million.
Investor appetite has been buffeted during the recession, shares in Virgin Blue slipping 39 per cent to its current price of 30.5c over the past year.
BusinessDay has reported a lukewarm response to the sounding out of investors about capital raisings made by Virgin Blue managers.
Virgin Blue was listed in May 2003 at $2.25 and reached a high of $2.80 in February 2007. The airline was buoyed on Thursday by an announcement it was planning a joint venture with Delta Airlines on the US-Australia and the US-South Pacific markets.
The joint venture, which requires regulator approval, was seen by analysts as defraying Virgin Blue's costs on the routes and reducing the period it would take to make a profit.
A Macquarie Equities analyst, Russell Shaw, upgraded the airline to a neutral because of forecast strong growth in earnings per share next year and the year after.