FIIG - The Fixed Income Experts

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Virgin Australia

by Thomas Jacquot | Sep 14, 2018

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Recommendation
Outperform
USD400m 8.50% Nov 2019
USD350m 7.875% Oct 2021
AUD150m 8.25% May 2023

Credit Outlook
Stable

Thomas Jacquot
Head of Research
+61 2 9697 8708
thomas.jacquot@fiig.com.au


Key Financials (AUDm)

FYE (30 Jun) 16 17 18F
Revenue 5,021 5,047 5,336
Adj. EDITBAR 850 894 995
Net Interest Expense 170 168 155
Adj. Net Debt 4,761 4,400 4,437
Net Debt/Adj. EDITBAR 5.6x 4.9x 4.4x
Adj. EDITBAR/ Net Interest Expense 1.6x 1.5x 1.8x
Passengers (mil) 23.72 24.17 24.68

Source: FIIG Securities

We initiate our coverage on Virgin Australia's 8.25% notes due 2023 with an Outperform recommendation. At the same time, we reiterate our Outperform recommendation on the company's 8.5% notes due 2019 and 7.875% notes due 2021. Our credit outlook is Stable

Executive Summary

  • Inflation linked securities should be in every fixed income portfolio. These securities protect investors against inflationary pressures while maintaining a steadily growing income flow.
  • Inflation linked securities should be in every fixed income portfolio. These securities protect investors against inflationary pressures while maintaining a steadily growing income flow.
  • Inflation linked securities should be in every fixed income portfolio. These securities protect investors against inflationary pressures while maintaining a steadily growing income flow.
  • Inflation linked securities should be in every fixed income portfolio. These securities protect investors against inflationary pressures while maintaining a steadily growing income flow.
Relative value
Issuer Des. Fixed/FRN Size (m) Coupon Maturity Mid-Price YTW YTW Date ZSpread (bp) Price Next Call Date Recom.
Virgin Australia Unsec. Fixed USD 400 8.50% 15 Nov 19 101.50 7.31% 15 Nov 19 460 100.00 15 Nov 19 O/P
Virgin Australia Unsec. Fixed USD 350 7.875% 15 Oct 21 100.00 7.87% 15 Oct 21 499 100.00 15 Oct 21 O/P
Virgin Australia Unsec. Fixed AUD 150 8.25% 30 May 23 101.85 7.79% 30 May 23 548 104.13 30 May 21 O/P

Source: FIIG Securities, Bloomberg
Note: Indicative prices as of 2 July 2018