International Airlines Group will use the proceeds from a convertible bond issue to fund its acquisition of Barcelona-based low-cost carrier Vueling.
Launch of the senior unsecured bonds is aimed at generating some €400 million ($520 million). In addition to financing the Vueling takeover - sealed when a €123.5 million share purchase was approved in April - the issue will enhance liquidity and lower cost of capital, says IAG.
The bonds, due to mature in 2018, can be converted into ordinary shares of IAG. The conversion price is to be set at a premium of 30-35% with a fixed rate of interest of 1.75-2.5%, payable semi-annually in arrears. Full conversion of the bonds would boost the number of IAG shares by 5%. The joint bookrunners and lead managers for the bond issue are Banco Santander, Barclays, Deutsche Bank, Morgan Stanley and UBS Investment Bank.
IAG's April acquisition of 44.66% of Vueling brought its holding in the carrier to 90.51%. The share purchase was funded initially by bridge loans from British Airways and Banco Santander. Bond proceeds will be used to repay these loans.
Vueling joins BA and Iberia in the IAG stable.