Virgin Australia regularly issues bonds which are traded in the “over-the-counter” market. The last issue occurred in February of this year when Virgin issued fixed-rate bonds with an 8.075% coupon. Before that, in May 2018, it raised $150 million with the issue of bonds with an 8.25% coupon. However, none of its bond series have been listed on the ASX so far in its relatively short existence.
Just a few weeks after Australian Unity announced two new securities to bolster an otherwise-shrinking number of corporate bonds listed on the ASX, Virgin Australia has announced its intention to issue a new series of callable corporate notes, also to be listed on the ASX.
Virgin is seeking to raise $150 million through the issue of Virgin Australia “Notes” (ASX code: VAHHA), with the ability to raise more or less than this amount. The notes will be subordinated and unsecured securities which will pay a fixed rate of interest semi-annually.
The proceeds will be used to partially fund the $700 million acquisition of 35% of its “Velocity” loyalty programme from Affinity Equity Partners. Another USD$425 million will be raised via an offer to institutional investors in the US.
The notes have an indicative coupon rate of 8.00% but the actual coupon rate will be determined by a “book build” on 4 November 2019, if not earlier. A book build is a tender process managed by investment banks on behalf of the issuer in which investment institutions each place bids for a set volume at a price/yield. (This is the same way as the AOFM holds tenders to sell government bonds each week).