BRITISH AIRWAYS INCREASES LIQ

RNS Number : 8363V

British Airways PLC

17 July 2009

 

This announcement contains details of an issue which is not for release in the United States of America, Canada, Australia, South Africa and Japan

BRITISH AIRWAYS INCREASES LIQUIDITY 

British Airways plans to raise £600 million of cash funding to ensure it has strong liquidity consistent with the current difficult trading conditions.

The airline has launched today (July 17, 2009) a £300 million convertible debt issue. The issue will be conditional on approval from the airline's shareholders at a general meeting. It is the airline's intention that eligible existing institutional shareholders will be given the opportunity to take up a pro rata allocation as part of the bookbuilding process if they so wish.

The securities will be senior unsecured convertible bonds due in 2014 which will be convertible into 15-20 per cent of the issued ordinary share capital of British Airways. The final size of the offering will be determined at the time of pricing (expected to be later today).

In addition, the airline has also agreed terms with the trustees of its defined benefit 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 but only in the event of the airline's insolvency. This means that up to $540 million (approximately £330 million) of bank facilities will become available for the airline to draw in cash at any time until June 21, 2012.  

In accordance with disclosure and transparency rules, the airline is pre-announcing that its unaudited results for the first quarter (ending June 30, 2009) are expected to show revenue of approximately £1.98 billion and an operating loss of around £100 million, which is slightly better than market expectation. As at June 30, 2009 the airline had approximately £1.25 billion of cash and general facilities of around £130 million.  

The airline will publish its full interim management statement for the first quarter on July 31, 2009. 

The above funding is expected to add £600 million of further liquidity to the airline bringing it to a total of approximately £2 billion. The airline has already obtained facilities of more than $3 billion (£1.9 billion) specifically against future aircraft deliveries.  

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'.

FURTHER INFORMATION

The convertible bonds are expected to carry a coupon of between 5.50 per cent and 6.25 per cent per annum payable semi-annually in arrear and the conversion price is expected to be set at a premium of between 30 per cent and 38 per cent to the volume weighted average price of the shares from launch to pricing. The convertible bonds will be issued at 100 per cent of their principal amount and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the convertible bonds in 2014. The issuer will have the option to call the convertible bonds after three years from issuance at the principal amount, together with accrued interest, if the market price of the shares deliverable on conversion of the convertible bonds would exceed 150 per cent of the principal amount of the convertible bonds over a specified period. 

The bookbuilding process will close prior to the announcement of the final terms of the convertible bonds which is expected to be made today and closing is expected on or about 13 August 2009. 

The airline has appointed Barclays Capital, Deutsche Bank AG London Branch, HSBC, Merrill Lynch International and RBS Hoare Govett Ltd as joint bookrunners and joint lead managers.  

The convertible debt issue is subject to an increase option and is targeting institutional investors outside the United States, Canada, Australia, South Africa and Japan.

This announcement does not constitute or form part of an offer to sell or the solicitation of an offer to subscribe for or otherwise acquire any securities. The securities have not been and will not be registered under the U.S. Securities Act of 1933 and are subject to U.S. tax law requirements. Accordingly, these securities may not be offered, sold or delivered in the United States or to U.S. persons.

This press release is for information only and does not constitute an offer to sell, subscribe, purchase, exchange or transfer any securities or a solicitation of any such offer. This communication is directed only at persons who (i) are outside the United Kingdom or (ii) have professional experience in matters relating to investments or (iii) are persons falling within Article 49 (2(a) to (d) ('high net worth companies, unincorporated associations etc') of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons together being referred to as 'relevant persons'). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.

Stabilisation/FSA

ends

July 17, 2009                                                                                                                                                       078/LG/09

Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward looking statements. 

Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and the Company's plans and objectives for future operations, including, without limitation, discussions of the Company's Business Plan programs, expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this report are based upon information known to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 

It is not reasonably possible to itemize all of the many factors and specific events that could cause the Company's forward looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Fuller information on some factors which could result in material difference to the results is available in the Company's Annual Report for the year ended March 31, 2009, which is available on www.bashareholders.com.

 

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