Aer Lingus owner set to raise up to €2.5bn with share issue

Sources say IAG will raise the cash to keep the business afloat and avoid a bailout

The share price of IAG, the owner of Aer Lingus,  has lost 66% of its value since the start of the year. Photograph: Frank Grealish

The share price of IAG, the owner of Aer Lingus, has lost 66% of its value since the start of the year. Photograph: Frank Grealish

 

Aer Lingus owner IAG is set to issue shares at the end of the summer in a bid to raise up to €2.5 billion to keep the business afloat and avoid a bailout from the British government, several sources said.

International Consolidated Airlines Group (IAG) is most likely to raise capital with a rights issue, where new shares are offered to existing shareholders at a discount, by the beginning of September, two of the sources added.

Other options, such as an equity placing and a concurrent issuance of convertible bonds, are also being considered.

“Being a rescue deal, investors will undoubtedly prefer to have more visibility on air traffic during the summer months,” one source said.

The Anglo-Spanish group, which also owns Iberia and British Airways, renewed a £750 million multi-year partnership deal with American Express on Friday.

IAG declined to comment.

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 aid package from the French government, and Lufthansa agreed a €9 billion government bailout.

IAG, which is also reviewing a planned €1 billion acquisition of Spanish carrier Air Europa because of the harsh economic climate, has not asked for a specific government bailout but has taken advantage of state-backed loan schemes in Britain and Spain. British Airways has warned it needs to cut 12,000 jobs.

Loans

Spanish airlines Iberia and Vueling have secured €1 billion of government-backed loans in May.

British Airways has also accessed the UK coronavirus corporate finance facility and used the government’s furlough schemes.

IAG is working with US investment banks Goldman Sachs and Morgan Stanley and its corporate brokers Barclays and Deutsche Bank on the plan, the sources said, expecting an announcement could coincide with results on July 31st.

Deutsche Bank and Barclays declined to comment. Goldman Sachs and Morgan Stanley did not respond to a request for comment.

IAG reported a first-quarter operating loss before exceptional items of €535 million, and expects significantly worse losses in the second quarter, reflecting the full extent of travel lockdowns during the pandemic. – Reuters