International Airlines Group is launching a senior unsecured convertible bond offer of up to an approximate maximum amount of €400 million to fund its acquisition of Vueling, enhance liquidity and lower its cost of capital.
The bonds, which are due to mature in 2018, can be converted into ordinary shares of IAG.
It is expected that the bonds’ conversion price will be set at a premium of between 30 - 35 per cent with a fixed rate of interest between 1.75 – 2.5 per cent, payable semi-annually in arrears.
The final size of the offer will be determined at the time of pricing which is expected to be later today.
Full conversion of the bonds would increase the number of IAG shares in issue by up to five per cent.
On April 26th, 2013, IAG completed the acquisition of 44.66 per cent of Vueling following a cash tender offer.
When added to the 45.85 per cent of Vueling shares owned by IAG’s subsidiary Iberia, the IAG Group now owns 90.51 per cent of Vueling.
The cost of purchasing the Vueling shares was €123.5 million which was funded initially by bridge loans from British Airways and Banco Santander.
The net proceeds from the bonds will be used partly for the repayment of these loans.
IAG chief executive Willie Walsh said: “We are raising cash to fund our acquisition of Vueling, an airline that will be a great addition to IAG.
“It will also enable IAG to have cash available to improve general liquidity and improve the credit profile of the group.”
The bond issue is not subject to approval by IAG shareholders and is being issued by IAG using powers delegated to its board at its Annual General Meeting in June 2012.