(Updates with company's statement)
By Clara Denina , Pamela Barbaglia and Abhinav Ramnarayan
LONDON, July 24 (Reuters) - British Airways owner
IAG said on Friday it is drawing up plans for a
possible rights issue of up to 2.75 billion euros ($3.20
billion) to strengthen its balance sheet.
International Consolidated Airlines Group made the statement
after Reuters reported that it was planning a rights issue of up
to 2.5 billion euros, citing three sources.
IAG's share price has lost 66% of its value since the start
of the year, as global air travel came to a halt during the
coronavirus crisis. On Friday its stock fell more than 4%
following the Reuters story on the rights issue.
IAG said that no final decision has been made on whether or
when to proceed with the rights issue, where new shares are
offered to existing shareholders at a discount.
Two sources had earlier told Reuters that the company was
targeting the end of the summer for the capital raise, which
would keep the business afloat and avoid a government bailout.
"Being a rescue deal, investors will undoubtedly prefer to
have more visibility on air traffic during the summer months,"
one said.
The Anglo-Spanish group, which also owns Iberia and Aer
Lingus, just renewed a 750 million pound ($955 million)
partnership multi-year deal with American Express.
With passenger numbers decimated this year and experts
forecasting it will be years before they recover, global
airlines began sweeping restructuring processes and in many
cases sought state assistance.
Air France secured a 7 billion euro aid package
from the French government and Germany's Lufthansa
agreed a 9 billion euro government bailout.
IAG, which is also reviewing a planned 1 billion euro
acquisition of Spanish carrier Air Europa because of the harsh
economic climate, has not asked for a specific government
bail-out but has taken advantage of state-backed loan schemes in
Britain and Spain. British Airways has warned it needs to cut
12,000 jobs.
Spanish airlines Iberia and Vueling have secured 1 billion
euros of government-backed loans in May. BA has also accessed
the UK coronavirus corporate finance facility and used the
government's furlough schemes.
IAG is working with U.S. investment banks Goldman Sachs and
Morgan Stanley and its corporate brokers Barclays and Deutsche
Bank on the plan, the sources said.
Deutsche Bank and Barclays declined to comment. Goldman
Sachs and Morgan Stanley did not respond to requests for
comment.
IAG reported a first-quarter operating loss before
exceptional items of 535 million euros and expects significantly
worse losses in the second quarter, reflecting the full extent
of travel lockdowns during the pandemic.
It will release its second quarter results on July 31.
($1 = 0.8678 euros)
(Additional reporting by Arno Schuetze in Frankfurt and Sarah
Young in London;
Editing by Rachel Armstrong/ Louise Heavens/Susan Fenton)