British Airways owner IAG boosts liquidity with €800m convertible bond
British Airways owner IAG is tapping investors for €800m to strengthen its balance sheet and take advantage of the easing of restrictions this summer.
The FTSE-listed company has been hit hard by the pandemic with most of its fleet grounded due to travel restrictions. It has a weekly cash burn rate of €175m meaning its main focus during the pandemic has been on raising funds.
Last week IAG, which also owns Aer Lingus, Iberia and Vueling, said it had liquidity of €10.5bn, helped by a recent rights issue, as well as a revolving credit facility.
Today it announced plans to launch a convertible bond with an initial issue size of €800m to help with its overall liquidity position.
“Given the continuing uncertainty in respect of air travel, the net proceeds from the offering will be used by IAG to strengthen the group’s balance sheet… and provide the group with increased operational and strategic flexibility to take advantage of a recovery in demand,” chief financial officer Stephen Gunning said.
The news weighed on IAG’s shares, which are down more than five per cent.
While IAG has forecast a travel recovery from July it was left disappointed by the cautious reopening of travel restrictions last week, which left Spain and the US off the so-called green list.
“We’re doing everything in our power to emerge in a stronger competitive position… we’re ready to fly but government action is needed,” IAG chief executive Luis Gallego.
He called for the UK and US to open up a “travel corridor” on the lucrative transatlantic route. “We have the conditions, similar high vaccination rates. It is key for the economy of this country to open that corridor as soon as possible. It’s an important market where scientific data supports what we are saying.”