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2.8 Billion Euro Share Issue Being Planned By British Airways Owner To Generate Funds

2.8 Billion Euro Share Issue Being Planned By British Airways Owner To Generate Funds
In order to generate more cash amid the hard economic hit because of the novel coronavirus pandemic on the airline industry, plans for a possible rights issue of up to 2.75 billion euros are being drawn up by the British Airways owner IAG, the company said on Friday.
This statement was issued by the International Consolidated Airlines Group following report in the media about the company planning to launch a rights issue to generate up to 2.5 billion euros last week.
Since the beginning of the current year, more than 66 per cent of value has been lots by the shares of IAG with the virtual halting of air travel because of the pandemic induced travel restrictions. After the news of the possible launching of rights issue, there was a further fall of 4 per cent in the company’s share price. 
The company has however not taken any final decision about the launch of the rights issue or when to launch it, if at all, IAG said. Rights issues involves offering of new shares to the existing shareholders of a company but at a discounted rate.
According to earlier reports, the company had set a target of making the launch and raising funds by the end of the summer which would help the company to keep the business afloat and avoid taking a bailout from the government. 
"Being a rescue deal, investors will undoubtedly prefer to have more visibility on air traffic during the summer months," said a report quoting sources with information of the matter.
A 750 million pound partnership multi-year deal with American Express has been renewed by the Anglo-Spanish group, which also owns Iberia and Aer Lingus.
Currently, there are sweeping restructuring measures being implemented by global airlines while many airlines have also sought government assistance and bailouts in the face of a near decimation of the number of flyers so far this year and with analysts and industry experts forecasting that recovery of the airline industry will take years. 
A 7 billion euro aid package from the French government was secured earlier by Air France while a 9 billion euro government bailout has been agreed for the German flagship carrier Lufthansa.
The current the harsh economic climate has also forced a review of planned 1 billion euro acquisition of Spanish carrier Air Europa by IAG, the company said. The British company has so far not sought any specific financial help or a bail out from the United Kingdom government. It has however used the state-backed loan schemes in Britain and Spain.
Warnings of about 12,000 job cuts have been issued by British Airways.
In May,  1 billion euros of government-backed loans was secured by Spanish airlines Iberia and Vueling. The UK government’s coronavirus corporate finance facility has been accessed by BA as well as the furlough schemes announced by the government.
According to reports, United States investment banks Goldman Sachs and Morgan Stanley and its corporate brokers Barclays and Deutsche Bank are working with IAG.
There were no comments on the issue available from Deutsche Bank, Barclays, Goldman Sachs and Morgan Stanley.

Christopher J. Mitchell

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