IAG is selling €1 billion of convertible bonds to help cover the purchase of Aer Lingus.
The bonds will be sold in two parts, maturing in 2020 and 2022, the London-based company said in a statement. Investors will have the option to swap the debt for equity when the stock rises by between 52.5 per cent to 62.5 per cent, according to the initial terms.
Chief Executive Officer Willie Walsh (pictured) cajoled the Irish government in May into backing IAG’s €1.4 billion offer for Aer Lingus, providing a fourth brand for the holding company formed from British Airways’ merger with Madrid-based Iberia in 2011. The proceeds from the bonds will be used for “general corporate purposes,” including the repayment of a bridge facility used to finance the Aer Lingus deal, IAG said.
IAG dropped as much as 3.4 per cent, the steepest intraday decline since 30 October, and was trading down 2.5 per cent at 599 pence as of 10:37 a.m. in London. That pared the stock’s gain this year to 23 per cent, valuing the company at £12.1 billion pounds.
The 2020 bond will be priced to yield between 0.25 per cent and 0.75 per cent, while the 2022 notes will yield between 0.625 per cent and 1.125 per cent, according to the statement. Final terms will be announced later Thursday.
The company’s promise to pay a dividend is protected under the terms of the bond, and IAG said it won’t issue or sell any shares for 90 days after the deal.
News by Bloomberg, edited by Hospitality Ireland