IAG issues €1bn in bonds to pay for Aer Lingus acquisition
Aer Lingus owner IAG is issuing two convertible bonds for a total of €1bn, a big chunk of which will be used to repay a loan secured to finance the €1.36bn acquisition of the Irish carrier earlier this year.
In September, a charge in favour of Landesbank Hessen-Thuringen Girozentrale was registered against a UK-based IAG subsidiary, AERL Holding, the firm that was used to effect the €1.36bn takeover.
That charge relates to a €600m term loan that was arranged for AERL Holding at the end of July.
Previously, AERL Holding had secured a €1.4bn bridge facility from banks including Bankia, BNP Paribas Fortis, CaixaBank and UniCredit to finance the acquisition.
After the Landesbank term loan was arranged, that previous €1.4bn bridge facility was reduced by €600m.
IAG said that it has now issuing two tranches of unsecured bonds, which are convertible into ordinary shares in the airline group, so that it can pay back some of that money used to buy Aer Lingus.
The first tranche of €500m will fall due in 2020 and have a coupon, or interest rate, of 0.25pc.
The second tranche of €500m fall due in 2022, and carry an interest rate of 0.625pc.
IAG said the conversion price of the shares has been set at €13.80 per share, which represents a premium of 62.5pc over the volume weighted average price of the IAG shares on the London Stock Exchange from the launch of the bonds to the pricing, which both took place yesterday.
"The net proceeds from the offering will be used by IAG for general corporate purposes, including the repayment of a bridge facility entered into by IAG's subsidiary, AERL Holding to finance its acquisition of Aer Lingus," said IAG yesterday.
IAG will have the option to redeem the bonds approximately three and five years respectively after their issue. They'll be listed next week on the Frankfurt Stock Exchange.
BoA Merrill Lynch, BNP Paribas and Deutsche Bank acted as joint global coordinators and joint bookrunners for the bond issues.
What came to be a long, drawn-out takeover process for Aer Lingus began almost a year ago, when IAG, which is headed by Willie Walsh and also owns British Airways, made its initial approach to the Aer Lingus board.
The takeover was completed in September after both the Government, which owned 25.1pc of Aer Lingus, and Ryanair, which owned close to 30pc of its smaller rival, agreed to sell their stakes to IAG.
IAG pledged to grow Aer Lingus if it acquired it. It aims to use the carrier to boost its position on the transatlantic market by funnelling passengers through a Dublin hub.