British Airways Owner Readying Its First Bond With A Junk Rating
Passenger aircraft operated by Iberia Express, a unit of International Consolidated Airlines Group SA (IAG), parked at gates at Madrid Barajas airport in Spain. (Photographer: Paul Hanna/Bloomberg)

British Airways Owner Readying Its First Bond With A Junk Rating

IAG SA has hired four banks to prepare an issue of bonds, its first as a junk-rated borrower since losing its prized investment-grade status in May as the pandemic took hold.

The parent company of British Airways, Iberia and Aer Lingus is seeking funds to strengthen its balance sheet against Covid-19’s impact on international travel, according to a person familiar with the matter.

The group appointed Banco Bilbao Vizcaya Argentaria SA, Goldman Sachs Bank Europe SE, Morgan Stanley and Banco Santander SA as joint global coordinators, the person said, asking not to be identified because they’re not authorized to speak publicly.

IAG and its bankers will meet potential investors on Tuesday and Wednesday to assess demand and a euro-denominated offering of senior unsecured bonds may follow.

The sale will include two maturities of debt and will be benchmark-sized, according to the person. That typically means at least 500 million euros ($597 million). An IAG spokeswoman declined to comment on the plans.

IAG and several other carriers saw their credit scores slashed during 2020 following the prolonged collapse in international air travel. Airlines have since become prolific users of capital markets as a source of cash to keep operating through the ongoing drought in ticket sales. A junk rating can make new debt pricier because investors demand higher interest to compensate them for the extra risk.

IAG last issued bonds in June 2019, selling 1 billion euros of senior unsecured notes in two parts. More recently, in September, it raised 2.7 billion euros ($3.2 billion) in equity capital via a rights offering. The group had 10.3 billion euros of cash at the start of 2021, it said in a presentation last month.

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