Ryanair plans €500m bond issue in summer

Ryanair is likely to borrow €500 million through a bond issue in early summer ahead of taking delivery of the first of 175 new craft from Boeing next September.

Standard & Poors (S&P) yesterday gave the Irish airline a BBB+ rating, indicating that the agency, which measures companies’ abilities to pay their debts, believes Ryanair has enough capacity to meet its financial commitments.

The ranking, which classes Ryanair as a lower risk for lenders than rival Lufthansa, brings the company a step closer to tapping capital markets for some of the $5.5 billion (€4bn) that it will need to raise over the next five years to pay for the Boeing 737-800s that it has on order.

It now appears likely that it will be in a position to go ahead with an initial €500 million bond issue in early summer, possibly shortly after publishing full-year results on May 19th.

Second rating
The company will have to get a second rating before it can borrow cash in this way. It and adviser Citibank are still in talks with two other ratings agencies Moody's and Fitch.

Ryanair will fund the purchase of the new craft through a mix of its own resources and raising $5.5 billion in capital.

Chief financial officer Howard Millar welcomed the S&P announcement.

“The successful achievement of this BBB+ rating is part of our plan to access the capital markets to finance the purchase of our Boeing 737-800 order via both secured and unsecured debt offerings.”

S&P's report states that Ryanair will continue to be profitable and maintain the 13 per cent return on capital that it has delivered over the last six years.

Deal with Russia
Meanwhile, the airline is close to a deal with Russia that could see it flying direct to St Petersburg and Moscow from Dublin. It emerged last year that the airline was in talks with the Russian transport authority Rosaviatsia, which had given it permission to fly to destinations there from the Republic.

Following an announcement yesterday detailing a series of expansions to its Dublin airport winter schedule, chief marketing officer Kenny Jacobs said that Ryanair was close to a deal that would allow it fly to St Petersburg and Moscow airports.

He explained that a number of issues still needed to be ironed out, including those relating to crew visas. Both countries’ governments were in talks relating to the problem and other airlines had found a solution to this.

The company is adding seven new routes, including Cologne, to its Dublin airport winter schedule this year, while it is increasing the frequency of flights on 21 existing routes.

Aer Lingus: State’s position

The Government’s position on the sale of the State’s 25 per cent stake in Aer Lingus has not changed, despite news that Abu Dhabi-based carrier, Etihad, recently pushed its stake in the Irish airline past the 4 per cent mark, the Minister for Transport, Tourism and Sport, Leo Varadkar, said yesterday.

Earlier this month, Etihad increased its holding in Aer Lingus from 2.98 per cent to 4.11 per cent in a series of share purchases this month. The airline has a partnership with the Irish company and has been tipped as a possible buyer for the State’s holding should it come on the market.

However, Mr Varadkar, said yesterday that the Government’s position on selling the stake has not changed. He pointed out that it would only dispose of the shares at the right time, for the right price and under the right conditions.

Late last year, the minister said that the Government was not pursuing such a sale, and pointed out that it was unlikely that any prospective buyer would meet all criteria set out, which would include making a long-term commitment to the Republic.

Mr Varadkar said that he has not spoken directly to Etihad for some time.