Aer Lingus owner International Airlines Group (IAG) has said that it will 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 at the end of the first quarter of 2021, helped recently by a new revolving credit facility and the deferral of some pension payments.
Boost To Liquidity
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This week, it said that its convertible bond issue will boost its liquidity by approximately €825 million. Strong demand for the offering means that it will raise more than the €800 million initially targeted for the senior unsecured bonds, which are convertible into IAG shares, and due in 2028.
IAG said that the proceeds will 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," Bernstein analyst Daniel Roeska said.
IAG was left disappointed by Britain's cautious reopening of travel last week, which left its big markets, Spain and the US, off of a list of low-risk destinations.
Announcing the final terms of the bonds, IAG said that the bonds will carry a fixed rate of interest of 1.125% payable semi-annually in arrears and the conversion price of the bonds has been set at €3.3694 per share, a premium of 45% over the volume weighted average price of the shares in the period from launch to pricing, translated into euros.
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