British Airways is looking to raise £600 million ($987 million) in cash to increase its liquidity in the face of "difficult trading conditions" amid the ongoing economic crisis.
"Following discussions with institutional investors, we're taking action to improve our liquidity and strengthen our position within the industry," says BA chief executive Willie Walsh in a statement to the London stock exchange.
"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."
The carrier says that it will launch a £300 million convertible debt issue that will also be offered to existing institutional shareholders. These unsecured bonds will be due in 2014 and can then be converted into ordinary share capital. The final size of the offer will be determined at the time of pricing, likely to be later today. This bond issue is subject to shareholder approval.
BA has also agreed with the trustees of its UK benefit pension schemes to release some bank guarantees back to the airline. These were provided in 2006 and accessible by the trustees only if the carrier became insolvent. As a result, up to $540 million of bank facilities, or approximately £330 million, will be available for BA to draw in cash before 21 June 2012.
As at 30 June, the airline had around £1.25 billion of cash and general facilities of around £130 million. The additional funding will give it total liquidity of around £2 billion. The airline says that it has obtained facilities of more than $3 billion specifically against future aircraft deliveries.
BA says that it is expected to show revenues of approximately £1.98 billion and an operating loss of around £100 million when it releases its results on 31 July. This is "is slightly better than market expectation", it adds.
Source: Air Transport Intelligence news
