Virgin Australia Gets $127 Million Queensland Lifeline Offer

(Bloomberg) -- Virgin Australia Holdings Ltd. has been offered a A$200 million ($127 million) lifeline from the Queensland government less than 24 hours after Australia’s Deputy Prime Minister all but ruled out nationalizing the embattled carrier.

The funding is conditional on the Federal government coordinating a response involving all states and territories. Under the proposal the company would remain headquartered in Queensland and would be required to restructure its debt, according to Queensland Minister for State Development Cameron Dick, who called on bondholders and other parties investing in Virgin to “to do their bit as well.”

Virgin Australia Nationalization Ruled Out by Deputy Leader

“We are calling on the prime minister and his colleagues to do the right thing by Queensland and to do the right thing by Australia to bring this plan together,” Dick told reporters outside Virgin’s Brisbane headquarters Saturday.

Dick said discussions about the method of delivery of funding had been around the issue of a convertible note, but said other options including a payroll tax deduction or a loan could be on the table.

“We are willing to be flexible,” Dick said. “As long as there is a national response to this we’ll do our bit as a state.”

The company was downgraded by Fitch Ratings and Moody’s Investors Service on Friday, with the former saying an increased strain on liquidity could make default a “real possibility.”

With at least two buyout groups preparing to take over Virgin, and the Federal government already providing a package of about A$1 billion for the aviation industry, the Queensland cash injection is a fraction of the A$1.4 billion loan the airline has already requested from the government.

Shares in the Brisbane-based company remain suspended as it seeks ways to weather the crisis.

©2020 Bloomberg L.P.