EasyJet Draws U.K. Virus Loan in Defiance of Founder

(Bloomberg) -- EasyJet Plc borrowed 1.1 billion pounds ($1.35 billion) to shore up its finances during the coronavirus pandemic, tapping into a U.K. guarantee program in defiance of founder Stelios Haji-Ioannou’s escalating activist campaign.

The U.K. discount carrier accessed 600 million pounds in Bank of England-backed commercial paper and requested to draw down 500 million pounds from an existing facility that’s secured against aircraft, it said in a statement Monday. The move comes a day after Haji-Ioannou said he’s try to oust Chief Financial Officer Andrew Findlay as part of a pressure campaign aimed at canceling 4.5 billion pounds of aircraft orders with Airbus SE.

The new loan came through the U.K.’s Covid Corporate Financing Facility open to investment grade companies. With the money, EasyJet said it will have about 2.3 billion pounds to see it through a crisis that’s forced it to ground its fleet and idle staff.

The carrier also said it had reached deals with its pilot and cabin-crew unions on furlough plans, and that it’ll consider further liquidity options “given the possibility of a prolonged grounding.”

EasyJet has also been defending itself against Haji-Ioannou, the carrier’s largest shareholder with a 34% stake. After the company rejected his request for a shareholder meeting to remove one board member, he pressed his case by saying he’ll try to remove Findlay.

Ousting the CFO “is the best way to stop him writing billion-pound cheques plus to Airbus every year,” Haji-Ioannou said in a statement posted on the website of his holding company EasyGroup. He opposes more loans, adding that ending the Airbus contract for more than 100 A320-series jets and holding off from buying more aircraft is the only way to “preserve the value for all shareholders.”

EasyJet extended gains, rising 16% in London on Monday. Stocks rose broadly on optimism the global fight against the virus was making progress.

With travel curtailed by the coronavirus, the discount airline has grounded its fleet to preserve cash. Fundraising scenarios it’s exploring include a delay in plane orders to conserve cash if needed for a longer-term downturn, people familiar with the matter said last week. It’s also open to issuing more stock, as Haji-Ioannou has suggested it do through a rights offering, though that’s considered a less favorable option, the people said.

“We have a longstanding contract with Airbus which allows a great deal of flexibility and are in discussion with them on how we can best use that flexibility in the current climate,” EasyJet said in an emailed response to questions. “This could include order deferrals and option cancellations where appropriate.”

EasyJet will release a trading update in the second half of April, and results for the fiscal first half through March will be announced on June 30, it said in the filing.

Haji-Ioannou stepped down from the board in 2010 to protest EasyJet’s expansion plans, and has long sought to slow growth in favor of profit and dividends. He’s seized on the coronavirus crisis to press his campaign, as airlines with little revenue have no immediate need for planes.

Last week, EasyJet rejected his proposal for a general meeting to remove directer Andreas Bierwirth, citing a technicality. The airline has said that doing so would be a distraction. With the latest move, the 53-year-old entrepreneur said he’d try to rally other shareholders and bondholders to his side.

Daniel Roeska, an analyst at Bernstein, said the commercial-paper loan probably comes without restictions, though EasyJet will probably need to refinance it within a year. The new funding should be “enough, in our view, to last the company until the end of the calendar year.”

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