TIDMIAG
RNS Number : 5951Y
International Cons Airlines Group
10 September 2020
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ARE APPLICABLE. PLEASE SEE THE IMPORTANT NOTICE AT THE OF THE
ANNOUNCEMENT.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
FOR IMMEDIATE RELEASE
10 September 2020
International Consolidated Airlines Group, S.A.
Fully Underwritten Capital Increase to Raise Gross Proceeds of
EUR2,741 million
Further to the announcement on 31 July 2020 and the approval by
shareholders on 8 September 2020, International Consolidated
Airlines Group, S.A. ("IAG", the "Company" and, together with its
subsidiaries, the "Group") today announces a fully underwritten
capital increase with pre-emptive subscription rights to raise
gross proceeds of EUR2,741 million (the "Capital Increase") through
the issuance of 2,979,443,376 new shares in IAG (the "New Shares").
The subscription price will be EUR0.92 for each New Share,
representing a 35.9% discount to the TERP (theoretical ex-rights
price) based on the closing price of the shares on 9 September
2020. As previously announced, Qatar Airways Group Q.C.S.C. ("Qatar
Airways"), IAG's largest shareholder (25.1% holding), has
irrevocably undertaken to subscribe for its pro-rata entitlement
under the Capital Increase. For each existing share of IAG, its
holder is entitled to one subscription right and 2 subscription
rights are required to subscribe for 3 New Shares.
Key Highlights
-- The Capital Increase to raise EUR2,741 million is designed to:
-- enable IAG to strengthen its balance sheet and reduce leverage;
-- enhance liquidity and help IAG withstand a more prolonged
downturn in air travel based on IAG's stressed, downside scenario
planning; and
-- provide IAG with the operational and strategic flexibility to
take advantage of a recovery in demand for air travel.
-- IAG acted quickly to mitigate the impacts of the COVID-19
pandemic, bolster liquidity and to protect its long-term future.
These actions preserved cash through a range of measures including:
capacity reductions; lowering operating costs; accessing Government
wage support schemes in the UK, Spain and Ireland and other
measures agreed to reduce employee costs; reducing discretionary
spending, including halving planned capex over the next three
years, and significantly reducing fleet deliveries.
-- IAG believes the Capital Increase, together with its quick
response to the crisis, should enable the Group to emerge from the
current pandemic in a strong position, with more resilience,
greater flexibility and the ability to make the right operational
and strategic decisions for the long term benefit of all its
stakeholders.
-- IAG has a proven and successful operating model underpinned
by its portfolio of world-class brands, global leadership positions
in each of its home markets and unique structure. The Group has a
strong track record of value-enhancing consolidation and delivering
value to shareholders through industry-leading returns and growing
profitability.
-- Qatar Airways, IAG's largest shareholder (25.1% holding), has
irrevocably undertaken to subscribe for its pro-rata entitlement
under the Capital Increase.
-- The Capital Increase was approved by shareholders at the
General Shareholders' Meeting on 8 September 2020.
Details of the Capital Increase
-- The subscription price of EUR0.92 per New Share represents a
discount of 35.9% to the TERP (theoretical ex-rights price) of
EUR1.44 per share by reference to the closing price on 9 September
2020 (the last business day before this announcement).
-- The gross proceeds of the Capital Increase will amount to an aggregate of EUR2,741 million.
-- For each existing share of IAG, its holder is entitled to one
subscription right and 2 subscription rights are required to
subscribe for 3 New Shares.
-- The preferential subscription period is expected to last
fifteen calendar days from the day after publication of the Capital
Increase in the BORME (Official Gazette of the Business Register),
during which the subscription rights can be traded.
-- The New Shares will confer to their holders the same voting
and economic rights as the ordinary shares of the Company currently
in circulation.
-- Subscription rights that are not exercised shall
automatically lapse at the end of the subscription period and,
therefore, shareholders who take no action will not receive
compensation for any unused or expired subscription rights and will
be diluted.
-- The Capital Increase is, subject to certain customary
conditions, underwritten by Goldman Sachs International and Morgan
Stanley & Co. International plc acting as Joint Sponsors, Joint
Global Coordinators and Joint Bookrunners, Deutsche Bank
Aktiengesellschaft acting as Joint Global Coordinator and Joint
Bookrunner and Banco Bilbao Vizcaya Argentaria, S.A, Banco
Santander, S.A., Barclays Bank PLC, BofA Securities, Citigroup
Global Markets Limited and Credit Suisse Securities (Europe)
Limited acting as Joint Bookrunners.
Use of Proceeds
The net proceeds of the Capital Increase will be used to
strengthen the Group's balance sheet by reducing financial leverage
and increasing IAG's liquidity position.
Current Trading and Outlook
Following an almost complete cessation of new booking activity
in April and May, June saw a significant increase in bookings to
approximately 30% of prior year levels by the end of the month.
This was driven by the easing of country lockdowns in key home
markets and across Europe as well as the gradual re-opening of
intra-European borders. Domestic travel has led the recovery,
followed by international short-haul and then long-haul travel.
Since July, IAG has experienced an overall levelling off of
bookings. Short-haul bookings have fallen slightly following the
re-implementation of quarantine requirements by the UK and other
European governments for travellers returning from specific
countries including Spain.
As anticipated, IAG has seen a delayed recovery of long-haul
booking activity, impacted by the continued existence of travel
restrictions to many long-haul destinations, including North and
South America. Long-haul bookings have seen a modest increase since
mid-August.
Where travel markets have reopened without border restrictions
and quarantine requirements IAG has been encouraged by the level of
pent-up demand that exists for air travel.
As a result of the impact of current travel restrictions and
quarantine requirements on booking activity, the Group's capacity
planning scenario for 2020 has been lowered to minus 63% in terms
of available seat kilometres (ASKs) compared to 2019 from minus 59%
previously. For 3Q 2020 capacity is expected to decline by 78%
compared to 2019 and lower than a decline of 74% in the previous
scenario. For 4Q 2020 capacity is expected to decline by 60%
compared to 2019 and compared to a decline of 46% in the previous
scenario. For 2021 capacity is expected to decline by 27% compared
to 2019, a reduction compared to 24% previously planned.
Despite a lower capacity in 4Q 2020 than under the previous
planning scenario, the Group continues to expect that it would
reach breakeven in terms of Net cash flows from operating
activities during 4Q 2020. This is as a result of mitigating
actions taken to reduce operating expenses further and enhance
working capital.
There has been no change to the Group's expectation that it will
take until at least 2023 for passenger demand to recover to 2019
levels.
There has also been no change to the Group's downside planning
scenario, which was used to determine the size of the Capital
Increase. The downside scenario includes a reduction in capacity in
terms of ASKs of 66% in 2020 and 35% in 2021 relative to 2019. IAG
considers that further downside to the latest planning scenario is
more likely to be in the form of delays or extensions to the
recovery trajectory, for example as a result of partial travel
restrictions, rather than a return to full lockdown.
IAG has continued to implement its restructuring plans. British
Airways is in the process of reducing headcount by up to 13,000. By
the end of August, the headcount was reduced by 8,236 due to
employees leaving the business and mostly as a result of voluntary
redundancy. It has concluded labour agreements with its pilots,
engineers and Heathrow customer service staff. In regard to cabin
crew, agreement in principle has been reached with Unite and a
consultative ballot is expected to start shortly. Other
consultation discussions continue, including with Heathrow ground
handling services and cargo operations staff, UK Contact Centre
employees and Gatwick based cabin crew. Iberia and Vueling continue
to benefit from the Spanish Government's ERTE furlough scheme,
which is expected to be extended into 2021. Aer Lingus has
implemented reductions in salaries and working hours across the
airline and expects 250 voluntary redundancies by the end of 2020.
IAG expects to report restructuring charges of c.EUR330 million in
its 2020 results associated with employee redundancies.
As at 31 August 2020, the Group had total liquidity of EUR7.6
billion, comprised of EUR5.8 billion of cash, cash equivalents and
interest-bearing deposits and EUR1.8 billion of undrawn and
committed general and aircraft facilities. Cash at the end of
August included an approximate GBP750 million payment from American
Express, a significant part of which was a pre-purchase of Avios
points, as announced on 24 July 2020.
Directors' Intentions
Each Director who is a shareholder and who is able to
participate in the Capital Increase has irrevocably undertaken to
take up in full or in part his or her entitlement to subscribe for
New Shares.
Prospectus
A prospectus (the "Prospectus") setting out the full details of
the Capital Increase, including a full timetable of key dates, is
expected to be approved and registered by the Spanish National
Securities Market Commission ("CNMV") in the coming days and to be
published on the Company's website (www.iairgroup.com) and the CNMV
(www.cnmv.es). The preceding summary should be read in conjunction
with the full text of the following announcement, together with the
Prospectus.
The Prospectus will also include details for shareholders on how
to participate in the Capital Increase. Unless the context
otherwise requires, words and expressions defined in the Prospectus
shall have the same meanings in this announcement.
This announcement contains inside information and is disclosed
in accordance with the Company's obligations under the Market Abuse
Regulation (EU) No 596/2014. Steve Gunning, Chief Financial
Officer
CONTACT DETAILS
Goldman Sachs International (Joint Financial Adviser and Joint
Global Coordinator)
+44 (0) 207 774 1000
Anthony Gutman
Richard Cormack
Nimesh Khiroya
Morgan Stanley (Joint Financial Adviser, Joint Global
Coordinator and Joint Corporate Broker)
+44 (0) 207 425 8000
Colm Donlon
Henrik Gobel
Andrew Foster
Deutsche Bank (Joint Global Coordinator and Joint Corporate
Broker)
+44 (0) 207 545 8000
Matt Hall
Javier Rapallo
Saadi Soudavar
Rothschild & Co (Independent Financial Adviser to IAG)
+44 (0) 207 280 5000
John Deans
Peter Nicklin
Shannon Nicholls
IMPORTANT NOTICES
These materials may not be published, distributed or transmitted
in the United States, Australia, Canada, Hong Kong, Japan, New
Zealand, Singapore, South Africa, Switzerland or the United Arab
Emirates, or in any other jurisdiction in which the distribution,
release or publication would be restricted or prohibited. These
materials do not constitute an offer of securities for sale or a
solicitation of an offer to purchase securities (the "Securities")
of the Company in the United States or any other jurisdiction. The
Securities may not be offered or sold in the United States absent
registration or an exemption from registration under the U.S.
Securities Act of 1933, as amended (the "Securities Act"). The
Securities have not been, and will not be, registered under the
Securities Act. There will be no public offer of securities in the
United States.
This announcement is an advertisement and not a prospectus for
the purposes of the Prospectus Regulation. A final form prospectus,
which is expected to be approved by the Spanish National Securities
Market Commission (Comisión Nacional del Mercado de Valores), will
be prepared and made available to the public in accordance with the
Prospectus Regulation. The approval of the prospectus should not be
understood as an endorsement of the securities. Investors should
not subscribe for or purchase any transferable securities referred
to in this announcement except on the basis of information
contained in the prospectus published and should read the
prospectus before making an investment decision in order to fully
understand the potential risks and rewards associated with the
decision to invest in the securities. The final form prospectus,
when published, will be available on the website of the Spanish
National Securities Market Commission (www.cnmv.es) and the website
of the Company (www.iairgroup.com).
This announcement does not constitute a recommendation
concerning any investor's decision or options with respect to the
Capital Increase. The price and value of securities can go down as
well as up. Past performance is not a guide to future performance.
The contents of this announcement are not to be construed as legal,
business, financial or tax advice. Each shareholder or prospective
investor should consult his, her or its own independent legal
adviser, business adviser, financial adviser or tax adviser for
legal, financial, business or tax advice.
Apart from the responsibilities and liabilities, if any, which
may be imposed on Goldman Sachs, Morgan Stanley, Deutsche Bank,
Banco Bilbao Vizcaya Argentaria S.A., Banco Santander S.A.,
Barclays Bank PLC, BofA Securities Europe SA, Citigroup Global
Markets Limited and Credit Suisse Securities (Europe) Limited
(together, the "Underwriters") by the FSMA or the regulatory regime
established thereunder, neither of the Underwriters nor any of
their respective affiliates accepts any responsibility or liability
whatsoever and makes no representation or warranty, express or
implied, for the contents of this announcement, including its
accuracy, fairness, sufficiency, completeness or verification or
for any other statement made or purported to be made by it, or on
its behalf, in connection with the Company or the Capital Increase
and nothing in this announcement is, or shall be relied upon as, a
promise or representation in this respect, whether as to the past
or future. Each of the Underwriters and their respective affiliates
accordingly disclaims to the fullest extent permitted by law all
and any responsibility and liability whether arising in tort,
contract or otherwise (save as referred to above) which it might
otherwise have in respect of this announcement or any such
statement. Furthermore, each of the Underwriters and/or their
affiliates provides various investment banking, commercial banking
and financial advisory services from time to time to the
Company.
Goldman Sachs International ("Goldman Sachs") is authorised in
the United Kingdom by the Prudential Regulation Authority (the
"PRA") and regulated in the United Kingdom by the Financial Conduct
Authority (the "FCA") and the PRA. Goldman Sachs is acting as Joint
Financial Adviser (except in connection with its role as
underwriter on the Capital Increase) and Joint Global Co-ordinator
to the Company and no other person in connection with this
announcement and will not be responsible to anyone other than the
Company for providing the protections afforded to clients of
Goldman Sachs nor for providing advice to any person in relation to
any matters referred to in this announcement.
Morgan Stanley & Co. International plc ("Morgan Stanley") is
authorised in the United Kingdom by the PRA and regulated in the
United Kingdom by the FCA and the PRA. Morgan Stanley is acting as
Joint Financial Adviser, Joint Global Co-ordinator and Joint
Corporate Broker to the Company, and will not regard any other
person as a client and will not be responsible to anyone other than
the Company for providing the protections afforded to clients of
Morgan Stanley nor for providing advice to any such other
person.
Deutsche Bank Aktiengesellschaft ("Deutsche Bank") is authorised
under German Banking Law (competent authorities: European Central
Bank and German Federal Financial Supervisory Authority ("BaFin"))
and, in the United Kingdom, by the Prudential Regulation Authority.
It is subject to supervision by the European Central Bank and the
BaFin, and to limited supervision in the United Kingdom by the
Prudential Regulation Authority and the Financial Conduct
Authority. Details about the extent of Deutsche Bank's
authorisation and supervision by these authorities are available on
request. Deutsche Bank is acting as Joint Global Co-ordinator and
Joint Corporate Broker to the Company and no other person in
connection with this document and will not be responsible to anyone
other than the Company for providing the protections afforded to
clients of Deutsche Bank nor for providing advice to any person in
relation to any matters referred to in this announcement.
N. M. Rothschild & Sons Limited ("Rothschild & Co"),
which is authorised and regulated by the FCA in the United Kingdom
is acting exclusively for the Company and no one else in connection
with the Capital Increase or any other matter referred to in this
announcement and will not regard any other person (whether or not a
recipient of this announcement) as a client and will not be
responsible to anyone other than the Company for providing the
protections afforded to clients of Rothschild & Co or for
providing advice in connection with the Capital Increase or any
other matter referred to in this announcement.
Each of Credit Suisse Securities (Europe) Limited, Citigroup
Global Markets Limited and Barclays Bank PLC are authorised in the
United Kingdom by the PRA and regulated in the United Kingdom by
the FCA and the PRA. Barclays Bank PLC is acting solely for the
Company only in connection with the Capital Increase and will not
be responsible to anyone other than the Company for providing the
protections offered to the clients of Barclays, nor for providing
advice in relation to the Capital Increase or any matters referred
to in this announcement.
BofA Securities Europe SA is governed by articles L. 531-1 and
following of the monetary and financial code. BofA Securities
Europe SA is authorised as an investment firm by the Autorité de
Contrôle Prudentiel et de Résolution ("ACPR"), is regulated by the
ACPR and the Autorité des Marchés Financiers, and is not a credit
institution.
Banco Bilbao Vizcaya Argentaria S.A. is authorised by the Bank
of Spain and is enrolled in the Administrative Register of the Bank
of Spain with number 0182. It is subject to supervision by the
European Central Bank and by the Bank of Spain, and is subject to
limited regulation in the United Kingdom by the FCA and the
PRA.
Banco Santander S.A., is authorised by Bank of Spain and subject
to supervision by the Bank of Spain and by the European Central
Bank and to limited regulation by the Financial Conduct Authority
and Prudential Regulation Authority. Banco Santander is acting
exclusively for the Company and no other person in connection with
this prospectus and will not be responsible to anyone other than
the Company for providing the protections afforded to our clients
nor for providing advice to any person in relation to any matters
referred to in this prospectus.
None of Goldman Sachs, Morgan Stanley, Deutsche Bank or
Rothschild & Co, Banco Bilbao Vizcaya Argentaria S.A., Banco
Santander S.A., Barclays Bank PLC, BofA Securities Europe SA,
Citigroup Global Markets Limited and Credit Suisse Securities
(Europe) Limited, nor any of their respective subsidiaries,
branches or affiliates, nor any of their respective directors,
officers or employees owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of Goldman Sachs, Morgan Stanley, Deutsche Bank or
Rothschild & Co, Banco Bilbao Vizcaya Argentaria S.A., Banco
Santander S.A., Barclays Bank PLC, BofA Securities Europe SA,
Citigroup Global Markets Limited and Credit Suisse Securities
(Europe) Limited in connection with the Capital Increase, this
announcement, any statement contained herein, or otherwise.
Forward-Looking Statements
Certain statements included in this announcement are
forward-looking. These statements can be identified by the fact
that they do not relate only to historical or current facts. By
their nature, they involve risk and uncertainties because they
relate to events and depend on circumstances that will occur in the
future. Actual results could differ materially from those expressed
or implied by such forward-looking statements.
Forward-looking statements often use words such as "expects",
"may", "will", "could", "should", "intends", "plans", "predicts",
"envisages" or "anticipates" or other words of similar meaning.
They include, without limitation, any and all projections relating
to the results of operations and financial conditions of
International Consolidated Airlines Group, S.A. and its subsidiary
undertakings from time to time (the 'Group'), as well as plans and
objectives for future operations, expected future revenues,
financing plans, expected expenditure and divestments relating to
the Group and discussions of the Group's business plan. All
forward-looking statements in this announcement are based upon
information known to the Group on the date of this announcement and
speak as of the date of this announcement. Other than in accordance
with its legal or regulatory obligations, the Group does not
undertake to update or revise any forward-looking statement to
reflect any changes in events, conditions or circumstances on which
any such statement is based.
Actual results may differ from those expressed or implied in the
forward-looking statements in this announcement as a result of any
number of known and unknown risks, uncertainties and other factors,
including, but not limited to, the effects of the COVID-19 pandemic
and uncertainties about its impact and duration, many of which are
difficult to predict and are generally beyond the control of the
Group, and it is not reasonably possible to itemise each item.
Accordingly, readers of this announcement are cautioned against
relying on forward-looking statements. Further information on the
primary risks of the business and the Group's risk management
process is set out in the Risk management and principal risk
factors section in the Annual Report and Accounts 2019; these
documents are available on www.iairgroup.com. All forward-looking
statements made on or after the date of this announcement and
attributable to IAG are expressly qualified in their entirety by
the primary risks set out in that section. Many of these risks are,
and will be, exacerbated by the COVID-19 pandemic and any further
disruption to the global airline industry and economic environment
as a result.
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END
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