News: UPDATE 1-Virgin Australia plans to raise $625 mln through rights issue

• Follows A$159 mln equity placement to HNA Aviation
• Funds will be used to pay down debt, improve cash flow

(Adds chief executive comments, detail)

SYDNEY, June 15 (Reuters) - Virgin Australia (VAH), the country's second-biggest airline, said it plans to raise A$852 million ($625 million) in a rights issue for existing shareholders, bringing its recent fund-raising total to A$1 billion.

Virgin Australia aims to cut debt, amassed in part by its expansion beyond the low-cost carrier market to compete with Qantas Airways Ltd (QAN).

"It is now time to strengthen the balance sheet," Chief Executive Officer John Borghetti told reporters. "The balance of the funds will be used to pay down debt."

Under the proposal, the outcome of a wide-ranging capital review, shareholders will be offered stock at $0.21 per share, a 28.8 percent discount to Tuesday's close.

Shares in the company were trading slightly weaker on Wednesday morning, at $0.28.

The offer, which is fully underwritten, follows a A$159 million equity placement to China's HNA Aviation announced late last month.

Several of Virgin Australia's largest shareholders are participating in the rights issue, the company said, however 24 percent stakeholder Etihad Airways has yet to commit.

Borghetti said there would be a "realignment of jobs". He did not say how many jobs might be lost as a result of the capital structure review. ($1 = 1.3607 Australian dollars)