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easyJet bolsters cash by raising £419m in share sale
[LONDON] easyJet raised about £419 million (S$725.4 million) in a share sale, padding its coffers for the gearing up of flights as the European aviation sector emerges from the pandemic lockdown.
The stock offering, equal to almost 15 per cent of its existing share base, was placed at the price of 703 pence a share, representing a 5 per cent discount to the closing price on June 24, the Luton, London-based company said on Thursday in a filing.
The shares fell 4.6 per cent at 8.11am in London, taking the value down by half since the start of the year. After the sale and an up-to £350 million sale-and-leaseback transaction for its aircraft, easyJet said it will have more than £3 billion of cash, which it has said would strengthen its balance sheet and increase liquidity.
Britain's biggest discount airline was among the first European carriers to begin building up services again, and it said on Wednesday that its cash burn was slightly less-than-expected because more customers are opting to take vouchers instead of asking for refunds. easyJet is restarting with mainly internal flights in the UK and France, after hunkering down for months due to flight restrictions during the region's coronavirus lockdown.
"While there is an operational cost to the flights, and in our view many flights will initially fail to reach breakeven, the positive signal of 'flying again' combined with the current developments across Europe in reducing the severity of social distancing measures and lockdowns should support bookings," Daniel Roeska, an analyst at Bernstein wrote in a note to clients.
"As long as bookings start increasing, the cash flow for the company may well be positive during the startup," he said, cautioning that profitability may only return in the second half of 2021.
Its bid to counter the impact of the virus has been further complicated by feuding with easyJet's founder and largest shareholder, Stelios Haji-Ioannou, who has used the crisis to press a long-held demand for the airline to cancel a large aircraft order with Airbus. Last month, easyJet fended off an effort by Mr Haji-Ioannou to oust top management.
About one-third of the new placement will be subject to another shareholder vote, easyJet said. It plans to hold the meeting around July 14.
Mr Haji-Ioannou couldn't immediately be reached for comment on the share sale. He had previously called on the company to raise £600 million in equity through a rights issue to existing shareholders, although he said that he would only consider participating if the jet order was cancelled.
With Covid-19 infection levels on the decline in most of Europe, governments have been easing travel restrictions. Holiday spots including Greece, Spain and Portugal are seeking to win back passengers. Airlines are likewise trying to salvage the tail end of the summer season when tens of millions of people generally take their vacation.
The UK may also relax its controversial quarantine requirements for incoming passengers as early as next week, with the adoption of so-called air bridges.
easyJet said revenue increased a 1.6 per cent in the first half, while reporting a pretax loss of £353 million, including a £160 million charge for fuel hedges. The carrier said it wasn't possible to provide guidance for the remainder of the financial year, due to the coronavirus pandemic.
BNP Paribas and Credit Suisse are joint global coordinators for the share sale, which will begin immediately, the carrier said.