IAG Group announced on Tuesday that it has signed a revolving credit facility with a syndicate of banks for an available amount of $1.755 billion. The facility will be in operation for a period of three years plus two one-year extension terms at the convenience of the lenders. The credit line is available to the Aer Lingus group airlines, British Airways and Iberia, each of which has a separate borrowing limit within the overall credit facility. IAG continues to have a strong liquidity position, with an estimated total of €10.3 Bn at March 31.
IAG liquidity position
Following the Brexit deal, IAG has had to implement plans to ensure ownership and control, guaranteeing the EU license of the various airlines. These include the creation of a national ownership structure for Aer Lingus and changes to the existing one in Spain. In addition, IAG is still exploring ways to improve its liquidity position. In this regard, British Airways has received commitments for a 5 year early repayment loan from UK Export Finance valued at £2bn. At the close of November 30, IAG had a liquidity position of £8bn, which did not include this loan from UKEF.
As reported in its Q1’20 financial results on May 7, IAG had a solid balance sheet and liquidity position prior to the health crisis. It had cash and undrawn credit lines amounting to 10 billion euros as of April 30. So the board’s announcement that it will carry out a 2.75 billion euros capital hike to strengthen its balance sheet (61% market capitalisation) was surprising.