Branson mortgages his airline

Sir Richard Branson, the billionaire entrepreneur, has mortgaged his entire stake in Virgin Atlantic, the airline he regards as the 'jewel in the crown' of his global empire.

Documents filed at Companies House last month say Branson's bank, Lloyds TSB, has been given a 'charge' - financial terminology for a mortgage - over 'all stocks, shares, bonds' and other financial assets of Virgin Atlantic Ltd, the UK company that owns the airline.

Yesterday the tycoon said the deal was 'routine and normal business practice', and freed up money to fund expansion of his mobile phones and train businesses.

But disclosure of the mortgage will fuel speculation about the state of the Virgin empire, now under pressure on several fronts.

The deal means that, in certain circumstances, the bank could take control of the 51 per cent stake in the airline that Branson owns. He sold the rest last year to Singapore Airlines for £550 million.

The mortgage document does not reveal the value Lloyds TSB puts on the airline. It says the amount secured by the deal consists of 'all money and liabilities... which may be due, owing or incurred by the company'. The deal was done between Lloyds and Ivanco (No 1) Ltd, a UK-based vehicle that holds the airline's shares, which in turn is owned by one of Branson's offshore companies.

Lloyds TSB declined to comment on what it called 'client-confidential matters', but some banking experts said such a deal would often be done to give the bank security for rising loans.

Branson said there was nothing unusual about the mortgage, and that he had raised money for expansion in the same way many times before. 'We do it all the time. I like to keep as much equity as I can in my businesses and the banks want proper security, so they will take a charge over the shares.

'As a group, we have an extremely small overdraft facility, around £60m, compared with our assets. Banking facilities are the cheapest form of money when you give good security.'

He said there was no financial crisis at Virgin, which was expanding rapidly. 'We're doing a new deal every month,' he said.

But profits at the airline fell from £105m in 1999 to £42.6m in the spring of last year, and are now threatened by weakness in its main transatlantic market. These factors lead observers to estimate that it could now be worth less than half the £1.2 billion value put on it at the time of the deal with Singapore Airlines.

And there is pressure on other Virgin businesses. The dire performance of Virgin Trains running from London to the North West and Scotland was beginning to tarnish the brand even before the chaos following last year's Hatfield crash and declining state subsidies wiped out profits in the rail industry.

The value of Virgin Mobile has plunged, due to cutthroat competition across the global telecommunications market and the business is cash-hungry as Branson goes for US and European expansion.

Smaller parts of the sprawling empire, such as drinks, stores and personal financial services, continue to burn cash.