Necker Island (Photo: Marka/Universal Images Group Editorial via Getty Images)

Richard Branson turns to his Caribbean island to help bolster Virgin empire

Necker Island (Photo: Marka/Universal Images Group Editorial via Getty Images)

Necker Island has been Richard Branson’s personal fiefdom for 40 years. But as his Virgin-branded businesses are battered by the coronavirus crisis, the billionaire is turning to his Caribbean hideaway for cash.

Virgin Galactic Founder Sir Richard Branson demonstrates a spacewear system, designed for Virgin Galactic astronauts, at an event October 16, 2019 in Yonkers, New York.

Branson wrote to staff Monday saying he plans to “raise as much money against the island as possible” as the pandemic lays waste to industries where Virgin competes, including airlines, hotels and cruises.

While it’s true that Branson has been hit hard by the economic fallout from COVID-19, the move to put his own home on the line is also a result of the lukewarm response to his pleas for government bailouts of Virgin Atlantic Airways Ltd. and Virgin Australia Holdings Ltd. The Australian company collapsed into administration on Tuesday.

“In most countries federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines. Sadly, that has not happened in Australia.”

– Richard Branson in a message to Virgin Australia employees

Decades of media-friendly exploits, from attempts at world records to glitzy airline route launches to a bid to establish the world’s first space-tourism company, have become a millstone as states balk at coming to the aid of one of the world’s best-known entrepreneurs.

Colouring that reluctance is Necker Island itself, with the British Virgin Islands retreat portrayed as nothing more than a tax haven by some UK politicians and newspapers.

Branson confronts the claim in his letter, saying he bought it age 29 because of his “love” of the island and not for tax reasons. Necker, which was originally uninhabited, isn’t just a luxury home, he contends, but also is a business that employs 175 people.

The UK has yet to decide on Virgin’s request for financial support.

A variety of assets have been collateralized to raise funds during the pandemic, including art, diamonds and London homes, though mortgaging a private island would be particularly unusual.

‘He’s Different’

“To use an island to go to a third party to raise money, I haven’t seen that,” said Farhad Vladi, who rents and sells private islands and estimates Necker was worth more than $100 million before a hurricane strike in 2017. “But, of course, he’s different.”

Branson, who turns 70 in July, has been a resident there since 2006, receiving guests including Princess Diana and Barack Obama. “He’s very emotionally attached to the island,” Vladi said. “It’s part of his family.”

There’s little sign, though, that the announcement regarding Necker and an appeal from Branson to help save thousands of jobs has changed many minds.

“Branson has not paid tax in this country for 14 years. On no account should he get a taxpayer bailout, loan or otherwise.”

– British lawmaker Diane Abbott in a tweet

The UK has yet to decide on Virgin Atlantic’s weeks-old application for hundreds of millions of pounds in support.

The government has asked the airline to provide details of efforts to seek private-sector cash and hired Morgan Stanley to assess its viability and economic contribution, according to people familiar with the matter. Virgin has engaged investment bank Houlihan Lokey Inc. to show that it’s exploring all funding options.

Virgin Australia’s position is more acute. Administrators at Deloitte have taken control of the Brisbane-based carrier, aiming to restructure the business and find new owners within months. Virgin Group has a 10% stake in the carrier.

“In most countries federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines,” Branson said in a message to Virgin Australia employees Tuesday. “Sadly, that has not happened in Australia.”

Branson has committed to injecting $250 million to support his companies, with a large share going to Virgin Atlantic. Securing much more cash, though, may be challenging.

His net worth, estimated at more than $5 billion by the Bloomberg Billionaires Index, has fallen by $2 billion since mid-February. Moreover, the web of investments that comprise Virgin Group makes it difficult to get access to that wealth at a time many of his businesses have seen demand collapse.

Former US president Barack Obama is counted among Branson’s guests at Necker Island.

Virgin Group, based like its founder in the British Virgin Islands, doesn’t report consolidated results. Branson last month also moved his $1.8 billion stake in space venture Virgin Galactic Holdings Inc. — his most valuable listed business — to the archipelago as part of an internal reorganisation.

A spokeswoman for Virgin Group didn’t respond to a request for comment.

Branson said in his letter that he doesn’t have much cash on hand, citing a record of extracting little “significant” profit from Virgin and instead constantly ploughing proceeds into new businesses. That’s meant funding a run of comparative duds such as Virgin Cola, as well as successes such as the space arm.

Some of the Englishman’s bets have sharpened the cash crunch. In particular, a rebound in Virgin Atlantic’s fortunes last year prompted him to scrap the sale of a 30 per cent stake to Air France-KLM in favour of retaining control.

Branson, who’d said the deal was vital to allow Virgin Atlantic to reach its full potential, should perhaps have heeded his own warnings about the precarious nature of the airline business.

“If you want to be a millionaire, start with a billion dollars and launch a new airline,” he once said, only half-jokingly.