Critics Skeptical Of Virgin America's Financing
02-20-2007, 07:30 PM
#1
Gets Weekends Off
Thread Starter
Joined APC: Nov 2006
Posts: 423
Critics Skeptical Of Virgin America's Financing
http://www.businessweek.com/bwdaily/...8587_db039.htm
Opponents of Virgin America continue to argue Virgin Group still supplies the bulk of the new carrier's financial backing, and they are using that rationale to persuade the U.S Transportation Dept. not to reverse its tentative decision to reject Virgin America's request to launch service.
American, Delta, US Airways and the Air Line Pilots Association all filed public comments regarding Virgin America's lengthy response to DOT's tentative rejection of its application.
American claims that Virgin America pointed out in its response that it recently garnered $13 million in additional debt funding from Virgin Group on top of what has already been supplied.
"To date, the Virgin Group has paid in $230 million in debt and $3.3 million in equity," American said, "while the alleged U.S. investors have furnished no debt financing and $10 million in equity. Therefore, as of now, the Virgin Group has furnished 96% of Virgin America's funding."
Delta also pointed out Virgin Group's 96% investment in Virgin America, noting that DOT has previously noted that debt interests raise many of the same concerns as equity interest.
Citing other elements of Virgin America's financing structure, American argues that a $78.8 million equity investment from U.S. investors, the additional $20 million in debt they're offering, and a $26.6 million equity shot from Virgin Group would create a $125.4 million cash inflow to Virgin America.
But the carrier also contends Virgin America's cash outlay at the second closing would be $171.4 million, resulting in a $46 million cash deficit.
"Virgin America has not explained how it would overcome such a shortfall at the second closing," American pointed out, "Because of the refusal of hedge fund investors to commit any more funding, and the fact that the Virgin Group has to this point provided 96% of Virgin America's financing, the only source of funding for the deficit would by the Virgin Group."
Opponents of Virgin America continue to argue Virgin Group still supplies the bulk of the new carrier's financial backing, and they are using that rationale to persuade the U.S Transportation Dept. not to reverse its tentative decision to reject Virgin America's request to launch service.
American, Delta, US Airways and the Air Line Pilots Association all filed public comments regarding Virgin America's lengthy response to DOT's tentative rejection of its application.
American claims that Virgin America pointed out in its response that it recently garnered $13 million in additional debt funding from Virgin Group on top of what has already been supplied.
"To date, the Virgin Group has paid in $230 million in debt and $3.3 million in equity," American said, "while the alleged U.S. investors have furnished no debt financing and $10 million in equity. Therefore, as of now, the Virgin Group has furnished 96% of Virgin America's funding."
Delta also pointed out Virgin Group's 96% investment in Virgin America, noting that DOT has previously noted that debt interests raise many of the same concerns as equity interest.
Citing other elements of Virgin America's financing structure, American argues that a $78.8 million equity investment from U.S. investors, the additional $20 million in debt they're offering, and a $26.6 million equity shot from Virgin Group would create a $125.4 million cash inflow to Virgin America.
But the carrier also contends Virgin America's cash outlay at the second closing would be $171.4 million, resulting in a $46 million cash deficit.
"Virgin America has not explained how it would overcome such a shortfall at the second closing," American pointed out, "Because of the refusal of hedge fund investors to commit any more funding, and the fact that the Virgin Group has to this point provided 96% of Virgin America's financing, the only source of funding for the deficit would by the Virgin Group."
Last edited by NGINEWHOISWHAT; 02-20-2007 at 07:32 PM. Reason: added spaces
Thread
Thread Starter
Forum
Replies
Last Post
