British Airways has reached two financing agreements that will increase its total liquidity for a value of 2.45 billion pounds sterling (2.83 billion euros), its parent company, the airline holding company IAG, informed the Spanish Securities and Exchange Commission (CNMV) on Monday.
In addition to these agreements, IAG continues to explore other debt initiatives to further improve its liquidity.
Thus, first, on December 31, 2020, IAG announced that British Airways had received commitments for a 5-year £2 billion (€2.31 billion) Export Development Guarantee loan facility underwritten by a syndicate of banks, partially guaranteed by UK Export Finance (UKEF), EuropaPress reported.
British Airways has reached a final agreement with UKEF and the lenders and expects to have this financing facility in place before the end of February 2021.
Second, as explained by IAG, British Airways has reached an agreement with the Trustee of New Airways Pension Scheme (NAPS) to defer £450 million (€519 million) of pension fund deficit contributions due between October 2020 and September 2021.
The agreement includes: deferring monthly contributions of £37.5 million (€43 million) from October 2020 to September 2021 for a total value of £450 million (€519 million).
During negotiations, the NAPS Trustee agreed to temporary deferrals of the contributions due in October, November, December and January.
Repayment of the £450 million (€519 million) accrued contributions plus interest will be added to the end of the existing Recovery Plan as monthly payments under a revised plan, which is currently due in March 2023.
Real Estate Assets as Collateral
In addition, British Airways has agreed to provide real estate assets as collateral, which will remain in place until the airline has repaid the deferred contributions.
The agreement also includes that British Airways will not pay dividends to IAG before the end of 2023.
From 2024, dividends paid will be matched by contributions to NAPS equal to 50% of the value of the dividends paid.
“Any such payments to NAPS will reduce the outstanding payment balance and will be capped at that level. The requirement to make such payments to NAPS ceases after the deferred contributions have been repaid,” the company explained.
In addition, the new Recovery Plan will be based on the triennial valuation as of March 31, 2021. If a new Recovery Plan has not been agreed by September 30, 2021, the default position is that British Airways will revert to monthly payments of £37.5 million (€43 million) from October 2021.
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