Spread the love

Post Views: 40

As the equity capital markets face one of the toughest times in history, Virgin Australia’s upcoming initial public offering (IPO) is set to put the spotlight on the investment banking industry’s top talent. Five senior investment bankers have been tasked with bringing the benchmark transaction to investors during the current challenging market conditions.

Goldman Sachs’ head of equity capital markets (ECM) Ian Taylor will lead the deal from the US bank’s end. UBS’ co-head of advisory and capital markets Richard Sleijpen and the Swiss bank’s head of ECM Matthew Beggs will play a vital role in welcoming more money managers to the deal. The deal leaders are rounded out by Barrenjoey Capital Partners’ ECM heads Jabe Jerram and Dyson Bowditch.

With the Australian share offerings experiencing the worst year in a decade, raising only $1 billion from new floats on the ASX in 2022, the Virgin Australia IPO has become the talk of the street. The global bourses’ sharp decline in company valuations, stubborn inflation, and interest rate hikes made it challenging to take companies public at stronger valuations.

Even though there is hope for a rebound in deal-making this year, the Reserve Bank of Australia’s signalling that more rate rises could materialize in 2023 has clouded the view for new IPOs. That means Goldman Sachs, UBS, and Barrenjoey’s top ECM bankers have their work cut out for them as they seek to re-list Virgin on the ASX.

Virgin has mandated some of investment banking’s best local talent. Messrs. Sleijpen and Beggs have maintained UBS’ market-leading position in Australian ECM, having done billion-dollar-plus universe IPOs for employment services firm APM and Link Management’s spin-off of PEXA in 2021.

Mr Taylor, Goldman Sachs’ globe-trotting ECM head, is well-placed to lead efforts for the US bank. He managed Latin American deals from Goldman’s Wall Street headquarters before returning to Australia to lead the local ECM outfit. He has led transactions involving multiple jurisdictions, like Mexican water company Rotoplas in 2014, and has the kind of global Rolodex needed for a Virgin IPO that will require deep-pocketed overseas investors.

Barrenjoey’s ECM co-heads, Mr Jerram and Mr Bowditch have worked on meaningful IPOs like Chevron’s $4.7 billion block trade of Caltex and Medibank’s IPO in 2014.

Despite Virgin projecting about $2.5 billion in first-half revenue, selling its relisting on the ASX will not be straightforward. With new floats falling 92% on the ASX last year, the number of IPOs on the local bourse also dipped 54% in 2022. As inflation dominates consumer spending, analysts question how profitable companies in the travel and leisure sector will be in the coming years when individuals prioritize greater mortgage repayments and more expensive utility bills.

Bankers will pitch Virgin as a slimmed-down airline with less debt and a smaller fleet that is cheaper to maintain. The company’s return to profitability is sure to ease investor concerns as Virgin focuses on domestic and short-haul international travel.

Bain Capital bought Virgin out of administration in 2020, and the private equity firm will retain a stake in the airline after the IPO.

In conclusion, the Virgin Australia IPO has put the spotlight on the top talent of the investment banking industry, who are tasked with bringing a benchmark transaction to skittish investors during one of the toughest times ever seen in the equity capital markets. The bankers have their work cut out for them.