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British Airways owner IAG tops up survival bond issue to €1.2bn on increased demand

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Analysts say shares in British Airways owner the IAG could more than double as investors look forward to a first dividend since the pandemic.
Analysts say shares in British Airways owner the IAG could more than double as investors look forward to a first dividend since the pandemic.

British Airways owner IAG topped up its bond offer today and will now raise €1.2bn (£1bn) through a bond sale to shore up its battered finances.

The FTSE blue chip this morning said that the bonds would be issued in two tranches.

The airline group confirmed further details tonight, with €500m of Series A bonds due in 2025 and another Series B €700m due in 2029.

Bondholders of the Series A tranche will earn 2.75 per cent, while the Series B tranche will earn 3.75 per cent.

Goldman Sachs, Morgan Stanley, Banco Bilbao Vizcaya Argentaria and Banco Santander will act as joint global co-ordinators and as joint lead bookrunners on the raising.

Credit agency Moody’s rated the proposed bonds B1, meaning it considers them a high risk investment.

Last month the airlines group – which also includes Iberia, Vueling, and Aer Lingus – fell to a loss of €7bn, its worst on record.

After passenger revenue declined 75 per cent due to the pandemic, the firm said that it would fly just a fifth of its capacity in the first three months of 2021.

Despite a wide-ranging cost-cutting programme, the group is still burning through €185m a week due to continued travel destrictions.

Today’s bond issue is just the latest in a growing number of steps IAG has taken to keep it airborne amid the worst crisis aviation has ever seen.

It currently has liquidity of €10.3bn, having raised €2.7bn and received loan guarantees worth an additional €2bn from UK Export Finance (UKEF).

Shares in IAG fell 0.5 per cent today to 215p, ending a recent run of gains.