UK. Troubled international carrier British Airways has announced that it plans to raise £600 million of cash funding, through a combination of bondholder debt and bank credit, to ensure it has enough of a safety net to survive the current downturn.
The airline has launched a scheme to raise £300 million by issuing unsecured convertible bonds due in 2014 which will be convertible into 15-20% of the issued ordinary share capital of the company. The issue will be conditional on approval from the airline’s shareholders at a general meeting.
In addition, the airline has also agreed terms with the trustees of its pension schemes in the UK to release some bank guarantees back to the airline. These guarantees were provided in 2006 and were accessible by the trustees only in the event of the airline’s insolvency. This means that up to approximately £330 million of bank facilities will become available for the airline to draw in cash at any time until June 2012.
The company added that it expected to report an operating loss of £100 million for the first quarter, which is “slightly better” than market expectations.
British Airways Chief Executive Willie Walsh said: “Following discussions with institutional investors, we’re taking action to improve our liquidity and strengthen our position within the industry.”
“This goes hand-in-hand with our cost reduction and efficiency initiatives, which are designed to create the right conditions for our sustainable, long term profitability. It also supports our continued investment programme to maintain our position as a leading global premium airline,” he added.
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