Virgin Blue seeks $291m in equity raising

SYDNEY - Virgin Blue Holdings is seeking A$231 million ($291.6 million) of new capital through an equity raising, as it announced the departure of its chief executive and forecast a net loss for 2008/09.

Virgin Blue's equity raising will consist of a placement of shares worth A$21 million, and a one-for-one non-renounceable rights offer seeking $210.4 million.

The airline said its 25.5 per cent shareholder, Virgin Group, would support the capital raising.

The airline told the Australian Securities Exchange today it expects a full year group net loss of $160 million to $165 million in the year to June 30, in what it calls "the most challenging global environment to date".

"Key drivers of capacity, demand and fuel remained volatile throughout FY09," the company said in a equity raising presentation.

Virgin Blue said its chief executive and co-founder, Brett Godfrey, would retire next year after more than 10 years with the company.

The airline said the board had ample time to manage the succession and was confident of appointing the right person to lead the company.

Virgin Blue said its short haul operations were expected to make a net profit of between $25m-30m for the year ending June 30.

The airline's long haul offshoot, V Australia, was expected to make a trading loss after tax of between $30m-35m , with a further $60-65 million in associated start-up and foreign exchange losses.

Financial instruments expenses - the non-cash cost of ineffective fuel and currency hedges - were expected to be $90m-95m for 2008/09.

Virgin Blue said it would use the proceeds of the capital raising to increase its liquidity and provide increased financial flexibility.

The carrier said it was issuing the new shares at 20 cents each, which is below the 29 cent closing price last Friday.

Virgin Blue said Sir Richard Branson's Virgin Group would invest $61 million-$79.9 million in the airline by participating in the equity raising.

The Virgin Group has committed to subscribe for 304.9 million shares under the entitlement offer and would act as a sub-underwriter for 20 per cent of the retail component of the offer, the airline said.

If there were no subscriptions under the retail entitlement offer, this would take Virgin Group's holdings in the airline to 30.2 per cent.

Virgin Blue said its underlying group result for 2009/10 was expected to be breakeven, with a positive group cash inflow, based on current market conditions.

The board has recommended that a final dividend not be paid for 2008/09, it said.

Virgin Blue reported a net profit of $A98 million in the 2007/08 financial year.

- AAP