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 Subscription price: € 0.92/sh. (-35.9% vs. TERP, which stands at € 1.44/sh.);
 Issuance of 2,979 M new shares (vs. ~1,990 M shares currently);
 2 rights will be necessary to subscribe 3 new shares;
 Qatar Airways, main shareholder in the group with a 25.1% stake, has irrevocably pledged to subscribe to the rights issue proportionally to its rights.
The rights issue, already announced and expected, is aimed at strengthening its balance sheet after the situation brought by Covid-19, and at improving its liquidity in view of a slowdown in air transport demand that could drag out, based on IAG’s assessment of more negative stress scenarios.
In this regard, IAG has announced that as of 31 Aug it had a liquidity position of € 7.6 Bn (vs. € 8.1 Bn as of 30 June), with € 5.8 Bn corresponding to cash and equivalents and € 1.8 Bn to general resources and unused aircrafts pledged. Taking into account the new resources that the company will have at its disposal following this rights issue, and the cash burnt in the past few months (€~800 M/month in 2Q’20 and €~250 M/month in Jul/Aug), we estimate that it will enjoy a comfortable liquidity position over approx. 20 months. This, added to the company’s message that it expects to achieve a balanced cash flow in 4Q’20, leads us to think that it would be making preparations around a possible negative scenario, expecting a -60% drop in capacity in 4Q’20 vs. 4Q’19 (-46% expected previously), and a -21% drop in 2021 vs. 2019 (-24% expected previously). Moreover, we understand that these resources could be used for the acquisition of Air Europa, without compromising its financial position. Separately, part of these funds could be used to meet the staff reduction costs expected for 2020 (€ 330 M), although the company points out that the number of employees has already been reduced by 8,236 vs. its target of 13,000.
In terms of valuation, after including the rights issue, our T.P. (currently Under Revision and vs. € 3.50/sh. previously) would exceed € 1.80/sh. post money, which would still yield an interesting upside >+25% vs. TERP (€ 1.44/sh.), and thus, we maintain our BUY recommendation.
IAG: ANNOUNCES RIGHTS ISSUE (ANÃLISIS BANCO SABADELL)
The company has announced a fully subscribed rights issue worth € 2.741 Bn (~63% market cap) with the following details: Subscription price: € 0.92/sh. (-35.9% vs. TERP, which stands at € 1.44/sh.);
 Issuance of 2,979 M new shares (vs. ~1,990 M shares currently);
 2 rights will be necessary to subscribe 3 new shares;
 Qatar Airways, main shareholder in the group with a 25.1% stake, has irrevocably pledged to subscribe to the rights issue proportionally to its rights.
The rights issue, already announced and expected, is aimed at strengthening its balance sheet after the situation brought by Covid-19, and at improving its liquidity in view of a slowdown in air transport demand that could drag out, based on IAG’s assessment of more negative stress scenarios.
In this regard, IAG has announced that as of 31 Aug it had a liquidity position of € 7.6 Bn (vs. € 8.1 Bn as of 30 June), with € 5.8 Bn corresponding to cash and equivalents and € 1.8 Bn to general resources and unused aircrafts pledged. Taking into account the new resources that the company will have at its disposal following this rights issue, and the cash burnt in the past few months (€~800 M/month in 2Q’20 and €~250 M/month in Jul/Aug), we estimate that it will enjoy a comfortable liquidity position over approx. 20 months. This, added to the company’s message that it expects to achieve a balanced cash flow in 4Q’20, leads us to think that it would be making preparations around a possible negative scenario, expecting a -60% drop in capacity in 4Q’20 vs. 4Q’19 (-46% expected previously), and a -21% drop in 2021 vs. 2019 (-24% expected previously). Moreover, we understand that these resources could be used for the acquisition of Air Europa, without compromising its financial position. Separately, part of these funds could be used to meet the staff reduction costs expected for 2020 (€ 330 M), although the company points out that the number of employees has already been reduced by 8,236 vs. its target of 13,000.
In terms of valuation, after including the rights issue, our T.P. (currently Under Revision and vs. € 3.50/sh. previously) would exceed € 1.80/sh. post money, which would still yield an interesting upside >+25% vs. TERP (€ 1.44/sh.), and thus, we maintain our BUY recommendation.
Underlying
International Consolidated Airlines Group SA
International Airlines Group is an international scheduled airline and global premium airlines. Co.'s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports.
Provider
Sabadell
Francisco Rodriguez
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