Aer Lingus-owner IAG boosts liquidity with €825m convertible bond

Aer Lingus-owner IAG said on Tuesday it would raise €825 million from a convertible bond, the group’s latest move to strengthen its balance sheet as travel remains at very low levels during the pandemic.

IAG, which also owns British Airways, Iberia and Vueling, has a weekly cash burn rate of €175 million while most of its fleet is grounded due to restrictions, meaning its focus over the past year has been on raising funds.

Forecasting a travel recovery from July, the group said last week that it had liquidity of €10.5 billion, helped recently by a new revolving credit facility and the deferral of some pension payments.

On Tuesday it said its convertible bond issue would boost its liquidity by around €825 million. Strong demand for the offering meant it would raise more than the €800 million initially targeted for the senior unsecured bonds, which are convertible into IAG shares, and due in 2028.

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The group’s shares were down 5.6 per cent at 197 pence in afternoon trading, underperforming a 2 per cent decline in London’s blue-chip share index.

IAG said the proceeds would strengthen its finances given continued uncertainty around the travel recovery, but could also be used to provide extra resources to take advantage of a recovery in demand.

“This is simply the next move for IAG to continue to bolster liquidity while the crisis drags on,” said Bernstein analyst Daniel Roeska.

IAG was left disappointed by Britain’s cautious reopening of travel last week, which left its big markets, Spain and the US, off a list of low-risk destinations.

Announcing the final terms of the bonds, IAG said the bonds would carry a fixed rate of interest of 1.125 per cent payable semi-annually in arrears and the conversion price of the bonds has been set at €3.3694 per share, a premium of 45 per cent over the volume weighted average price of the shares in the period from launch to pricing, translated into euro. – Reuters