Sir Richard Branson is not having a good crisis.
When he looks across his business empire from his Necker Island retreat, he must feel like Napoleon after the battle of Liepzig – not routed altogether but dangerously weakened on all fronts.
His brand new cruise liner, Scarlet Lady, is run aground in an industry holed by travel bans and news footage of Covid plague ships.
Virgin Gyms are in lockdown, while his stake in Virgin Money, sold to CYBG two years ago for shares, is worth less than it paid for Northern Rock nine years ago.
And if, by the way, you thought the wily fox’s finances were never really affected by the collapses in companies bearing his name; that his wealth was based solely on licensing out the brand rather than having real skin in the game, think again.
His Virgin Group owns 13% of the bank alone – a share that has fallen in value by more than £400 million.
That’s got to hurt.
Now, he has the begging bowl out for the businesses of which he’s perhaps fondest – his airlines.
Australia has already given his request the thumbs down and his airline there went bust today.
The Treasury here has sent his request on Virgin Atlantic back once and is not much impressed.
Branson, whose family business owns 51% of the airline, yesterday promised to mortgage Necker as collateral for £500 million lin loans and guarantees.
You did it for easyJet, he says, now do it for us.
But there’s a difference.
EasyJet went into this crisis with one of the strongest balance sheets in the industry.
It had a chunky investment grade credit rating meaning it qualified for the government’s Covid commercial paper scheme along with the likes of BP.
Virgin can’t say the same.
Apart from a brand, it’s not clear what assets it has.
Necker might be nice to visit, but my guess is the government would prefer security over Virgin’s planes. However, unlike easyJet, Virgin doesn’t own them.
That means that, not only are they no use as collateral, but Branson couldn’t sell and lease them back if he had trouble repaying the loan.
Besides which, Virgin Atlantic is backed by billionaire Branson and Delta – one of the biggest, most profitable airlines in the world. Why should taxpayer money not used to save FlyBe be spent on a lossmaking airline with such rich owners?
But there’s the rub.
Delta may be rich, but it has received US state bailout cash which the White House will not allow to be used to prop up some limey airline.
This one-off factor could be what gets Branson’s bailout bid over the line. He can plead that Delta would give him the money but can’t.
The Treasury may feel those are extenuating circumstances that give his case some credence.
After all, it’s not a good look for the country for Virgin Atlantic to go bust. As well as all the job losses, it is one of Britain’s most famous international brands – certainly better known than FlyBe.
And besides, for all the complaints in some quarters about his tax affairs and daft legal action against the NHS, Branson himself remains a popular figure in the public.
When I last saw him waiting for a Tube at Kensington High Street he was mobbed by fellow passengers. From a distance, it looked like Rod Stewart was in town.
In the Evening Standard’s weekly entrepreneurs feature, he is still cited more than anybody else as the country’s most admired entrepreneur.
His letter revealing his willingness to risk Necker was cleverly heartfelt and personal – note his inclusion of his wife “Joan and I” in the wording.
Offering up the family home seemed aimed to put him on a par with those thousands of small entrepreneurs currently being forced to give personal guarantees.
While it will have misfired with his critics, for his fans, it will have meant something.
It would be unwise to think that this sort of star quality counts for nothing in political circles.
While some in Government will say there should be no special cases when divvying up taxpayers’ money, others will say the demise of such an icon – by which I mean both Virgin and the man who has so wrapped himself up in it – would be a bruise too much for our economic morale.
If he offers up more of his own money to bolster the business, inveigles upon a wealthy chum or two to stump up as well and cuts the loan request a bit (£300 million rather than £500 million?), the Treasury could give him the nod.
Branson hasn’t met his Waterloo yet.
(Evening Standard)
