International Airlines Group PLC (LON:IAG), after the market close on New Year’s Eve, announced that British Airways has received commitments for a 5-year term-loan Export Development Guarantee Facility of £2.0bn underwritten by a syndicate of banks, partially guaranteed by UK Export Finance (UKEF).
The FTSE 100-listed group said British Airways expects to drawdown the facility in January 2021 subject to the agreement of final terms with the lenders and UKEF.
UKEF is the UK’s export credit agency and provides the Export Development Guarantee to support the working capital and capital expenditure needs of UK exporters that meet certain criteria.
British Airways is entitled to repay the loan at any time on notice. The arrangement contains some non-financial covenants, including restrictions on dividend payments by the airline to IAG.
The airlines group said the proceeds from the UKEF facility will be used to enhance liquidity and provide British Airways with the operational and strategic flexibility to take advantage of a partial recovery in demand for air travel in 2021 as coronavirus (COVID-19) vaccines are distributed worldwide.
IAG added that it continues to have strong liquidity with cash and undrawn facilities of €8.0bn as of November 30, 2020, excluding the UKEF facility. In addition to the UKEF facility, the group is said it is exploring other debt initiatives to improve further its liquidity and will update the market in due course.
Brexit changes implemented
In a separate statement, IAG also announced that it has implemented plans to ensure that its EU licensed airlines continue to comply with EU ownership and control rules following Brexit.
These remedial plans were approved by national regulators in Spain and Ireland and, as required, the EU has been notified about them. The plans include the implementation of a national ownership structure for Aer Lingus and changes to the group’s long-standing national ownership structure in Spain.
In addition, the composition of IAG’s board of directors has been changed so that it has a majority of independent EU non-executive directors. Deborah Kerr, María Fernanda Mejía and Steve Gunning have stepped down from the board and Peggy Bruzelius, Eva Castillo Sanz and Heather Ann McSharry have joined it, all with immediate effect. Steve Gunning’s executive functions as chief financial officer remain unchanged.
As previously announced, IAG’s chairman, Antonio Vázquez, is due to retire in January and at that time the IAG board will be reduced in size to eleven directors.
In the statement, Vázquez said: “It is disappointing that it has become necessary to make these changes to the Board. However, we are pleased that the EU-UK Trade and Cooperation Agreement recognises the potential benefits of further liberalisation of airline ownership and control because we believe that it is in the best interests of the industry and consumers.
“I would like to thank Deborah and María Fernanda for their valuable contribution to the Board and, particularly, Steve for supporting these changes.”
IAG’s chair-elect, Javier Ferrán added: “I am pleased that we have identified strong replacements for the departing Board members and am confident that IAG is well placed to take advantage of a partial recovery in air travel demand in 2021.”