IAG convertible raises $506m for Vueling deal
London, May 14, 2013
The International Airlines Group has raised 390 million euros ($506 million) through a convertible bond issue to help to fund the purchase of low-cost carrier Vueling.
Chief executive Willie Walsh said in a statement on Tuesday that the bond issue would also bolster liquidity and the credit profile of IAG, home to British Airways and loss-making Spanish flag carrier Iberia.
The bond deal shows how companies are continuing to take advantage of investor demand for convertibles, which offer the chance to profit from a surge in stock markets to multi-year highs without the risk of buying shares outright.
As at May 9, more than $10 billion has been raised from European convertibles this year, according to Thomson Reuters data, up 44 per cent on the same period last year.
The bonds, which mature in 2018 and have a fixed interest rate of 1.75 per cent, can be converted into IAG ordinary shares.
IAG said it had set a conversion price at 4.25 euros per ordinary share, a premium of around 35 percent to the average price of the stock on the London Stock Exchange on Tuesday morning from the launch of the bond to its pricing.
IAG shares were down 2.3 per cent at 1054 GMT, at 264.6 pence.
IAG said some of the money raised would go towards paying off bridge loans from its British arm and Banco Santander used to acquire Vueling for 123.5 million euros.
The company took control of Vueling in April, raising its stake in the company to over 90 percent from 46 percent in a deal that valued the Barcelona-based carrier at 277 million euros.
IAG is in the painful process of restructuring Iberia and has reached an agreement with unions to lay off more than 3,000 staff after months of intermittent strikes. The acquisition should help IAG improve its short-haul business and offset Iberia's losses.
IAG appointed Banco Santander, Barclays, Deutsche Bank AG's London branch, Morgan Stanley and UBS as joint bookrunners and joint lead managers for the bond issue.-Reuters