Safety of Virgin Rewards

Your VelocityRewards look pretty safe to me! I spent an hour this evening with publicly available FY18/19 financials for the 4 main entities controlling Rewards, and this is what I worked out:

1. the corporate structure I could quickly piece together is summarised on the first page of the PDF. I assume we are each beneficiaries of the Loyalty Trust

2. the net operating cashflows for Rewards averages about $145m/yr (this is cash after all operating expenses) … very profitable, but maybe not so much without Virgin?

3. HoldCo has an ongoing c$700m+ commitment to bondholders. Nonetheless, it is not in Administration and bondholders ordinarily only get paid a distribution after it is declared.

4. Even if HoldCo or VFF1/VFF2 were in trouble (I am not saying they are), it is unlikely to have a bearing on the Trustee (VFFPL). At best, Trustee is only up for goodwill to shareholders, and can’t be wound up for that.

5. Liabilities of $213m+ owed by HoldCo to Trustee are deferred, subject to (I assume) ipso facto clauses (pre-July 2018)

6. Trustee can be replaced, subject to a right of exoneration/recoupment – but can be sorted out in a sale

7. One of the Virgin entities apparently took $100m+ dividends out of Rewards in HY20

Check out all of the details and financials here: Velocity Rewards Financials

Velocity snapshot

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