British Airways to raise £300 million from convertible bonds

16 Jul 2009

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UK's flagship airline British Airways (BA) has scotched rumours of coming out with a £500-million rights issue, but said that it is talking to institutional investors about raising approximately £300 million from convertible bonds to ease its cash-flow crisis.

BA's chairman, Martin Broughton said at the company's annual general meeting on Tuesday that the board had ruled out coming out with a rights issue since "key issues need to be resolved over the next 12 months."

Saying that the past 12 months was an "annus horribilis" Broughton told shareholders, "This is the biggest crisis the aviation industry has ever known – and it continues."

Although the airline has £1.4 billion in cash, Broughton, told investors that the company BA's liquidity was above the desired minimum of 15 per cent of revenues, a prolonged recession could force BA to increase its cash at hand.

In May, BA posted its biggest ever loss since 1987, as the global recession took its toll with reduced passenger and cargo demand and high fuel prices last summer contributing to its £220 million operating loss. (See: British Airways post biggest ever loss since 1987)

The British carrier has adopted cost-cutting measures like cutback in capital expenditure for the financial year 2009-10 by f 20 per cent, cutting its capacity by 4 per cent with grounding up to16 aircrafts. (See: British Airways to slash capital expenditure by 20 per cent)

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