Oops, wrong call from The Melbourne Age after it claimed Virgin Blue was going to announce a $400 million capital raising and a major new shareholder to match or replace the Virgin group of Sir Richard Branson.
The story came several hours before the company asked for its shares to be suspended on the ASX.
"Virgin Blue Airlines Group (ASX: VBA) wishes to respond to statements in an article reported today, Monday, 13 July 2009 in the Fairfax press, including in The Sydney Morning Herald, The Age and WA Today.
"Virgin Blue Airlines Group notes the details contained in the article in relation to a potential capital raising, including references in the article to quantum, a cornerstone investor, the appointment of a specific investment bank and a timetable for announcement.
"Virgin Blue Airlines Group states that this information is not correct.
"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."
The company issued the statement at 3.01 pm after the suspension had been sought at 10.30 am. Why it took so long to issue a denial wasn’t explained by the company.
There’s a sense that perhaps it had been looking at raising money, but had found the going tough.
The company said it sought the suspension while it prepared a reply to the media speculation.
VBA shares fell nearly 5% in afternoon trading after the trading halt was lifted. The shares ended at 29 cents.
The overall market was off around 1.3%.
The Age report had speculated that Sir Richard Branson’s Virgin Group, owner of a 25.5% of VBA, would be unwilling or unable to participate in any capital raising.
In a statement quoted in the Fairfax papers websites yesterday before the official VBA statement 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."
Virgin Blue’s has been rumoured off and on for several months now about a possible fund raising.
Seeing the company has a value of $310 million or so, it is constrained by just how much it can raise. Richard Branson would have to accept a big dilution, or put in close to $100 million to maintain his stake.
But Virgin Blue under the 49% foreign shareholding limit that allows it to fly the Pacific.
A big cornerstone investor and the Branson holdings, plus a sizeable rights issue might be able to do that, if local investors strongly support a funding raising.
Virgin Blue last week announced 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 helping Virgin Blue’s cut costs on the routes and the time it would start making a profit from the new Trans-Pacific routes.
Virgin Blue’s credibility will be badly damaged if it reveals an issue in the next few weeks.
