BA owner IAG mulls €2.75bn raise by ‘end of summer’
British Airways owner IAG is mulling for a share issue worth up to £2.75bn (£2.4bn) at the end of the summer.
The plans to raise equity come as the airline group takes steps to shore up its finances in light of the coronavirus pandemic, which has battered the global aviation sector.
In a regulatory notice to the London and Madrid stock exchanges the group confirmed that it was considering taking the step.
It said: “The Group is evaluating the merits of a rights issue of up to €2.75 billion that would further strengthen IAG’s balance sheet.
“No decision has been made as to whether or when to proceed with a rights issue”.
Since the pandemic began, the group has lost two-thirds of its share price, and the stock dropped another four per cent this afternoon.
Earlier sources told Reuters that the business was most likely to look to raise through a rights issue to current shareholders by the beginning of September.
“Being a rescue deal, investors will undoubtedly prefer to have more visibility on air traffic during the summer months,” one said.
Unlike many of its counterparts, IAG has not sought a government bailout during the pandemic, though it has availed itself of lending and furlough schemes in countries such as the UK and Spain.
In May, it was revealed that BA had drawn down £300m from the Bank of England’s Corporate Covid Financing Facility, while sisters Vueling and Iberia claimed €1bn from a similar scheme in Spain.
Chief executive Willie Walsh is a well-known opponent of state aid. When IAG reported a first quarter loss of €1.5bn in May, he said:
“Where airlines are unwilling or unable to reform, they should not be bailed out by receiving free money from the government”.
European rivals Lufthansa and Air France have both obtained huge rescue packages worth €9bn and €7bn from their respective governments.
According to the reports, the company is working with US investment banks Goldman Sachs and Morgan Stanley and its corporate brokers Barclays and Deutsche Bank on the plan.
The sources said that an announcement could coincide with results on 31 July. IAG was not immediately available for comment.