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BA seeks to raise funds to weather crisis
By Robert Barr |
July 18, 2009, Saturday
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Print Edition
Print Edition
HARD-PRESSED British Airways said yesterday that it plans to raise 600 million pounds (US$980 million) to see it through the recession and financial losses, which it estimated at 100 million pounds for the three months through June.
The airline, which has been seeking cost-cutting deals with staff, announced it intended to raise 300 million pounds through a convertible debt issue and that it had secured the return of 330 million pounds worth of guarantees from pension fund trustees.
The debt issue is subject to approval by shareholders.
"The liquidity is clearly positive. We believe a significant re-rating of the stock is unlikely, given the exceptionally weak market conditions, reflected in poor premium traffic volumes," said Gert Zonneveld, an analyst at Panmure Gordon & Co.
"We expect substantial losses in the coming two years, the pension deficit remains a major headache and the Iberia (merger) talks seem to be dragging on and on with no immediate prospect of a deal," Zonneveld said.
The securities will be senior unsecured convertible bonds due in 2014, which can be converted into 15 percent to 20 percent of airline shares. The bonds will be available to institutional shareholders on a pro-rata basis, BA said.
The airline has called for 3,700 jobs to be cut from its 40,000 staff and a two-year pay freeze. It has also sought volunteers to temporarily forego their paychecks, as Chief Executive Willie Walsh is doing in July.
The airline, which has been seeking cost-cutting deals with staff, announced it intended to raise 300 million pounds through a convertible debt issue and that it had secured the return of 330 million pounds worth of guarantees from pension fund trustees.
The debt issue is subject to approval by shareholders.
"The liquidity is clearly positive. We believe a significant re-rating of the stock is unlikely, given the exceptionally weak market conditions, reflected in poor premium traffic volumes," said Gert Zonneveld, an analyst at Panmure Gordon & Co.
"We expect substantial losses in the coming two years, the pension deficit remains a major headache and the Iberia (merger) talks seem to be dragging on and on with no immediate prospect of a deal," Zonneveld said.
The securities will be senior unsecured convertible bonds due in 2014, which can be converted into 15 percent to 20 percent of airline shares. The bonds will be available to institutional shareholders on a pro-rata basis, BA said.
The airline has called for 3,700 jobs to be cut from its 40,000 staff and a two-year pay freeze. It has also sought volunteers to temporarily forego their paychecks, as Chief Executive Willie Walsh is doing in July.
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