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LONDON, May 11 (Reuters) - British Airways-owner IAG
said it would launch a convertible bond with an initial
issue size of 800 million euros, the group's latest move to
strengthen its balance sheet as travel continues at very low
levels during the pandemic.
IAG, which also owns Aer Lingus, Iberia and Vueling, has a
weekly cash burn rate of 175 million euros ($213 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 last week
said it had liquidity of 10.5 billion euros, helped by a recent
bond issue, a revolving credit facility and the deferral of some
pension payments.
It plans to add around 800 million euros to that, equivalent
to over a month's cash burn, through an offer of senior
unsecured bonds convertible into IAG shares and due in 2028.
The news weighed on the shares, which fell 5% to 199.5 pence
in early trading, more than a 2% decline in Britain's bluechip
market.
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
United States, off a list of low-risk destinations.
The final terms of the bonds will be announced later on
Tuesday. The conversion price is expected to be set at a premium
of 45-50% to the volume weighted average price of the shares in
the period from launch to pricing.
($1 = 0.8235 euros)
(Reporting by Sarah Young; editing by Paul Sandle)
