IAG Announces British Airways Financing Update With £2.45 Billion Liquidity Increase
IAG has confirmed that British Airways has reached two financing agreements that will increase the airline’s total liquidity by £2.45 billion. The Group continues to explore other debt initiatives to further bolster the company’s liquidity position.
On Monday (February 22, 2021), the International Consolidated Airlines Group (IAG) reported that British Airways has reached two financing arrangements that will bolster the carrier’s liquidity position by £2.45 billion. First, last December British Airways received commitments for a five year Export Development Guarantee term loan underwritten by a syndicate of banks and partially guaranteed by UK Export Finance. (UKEF). Now, British Airways has reached a final agreement with UKEF and lenders and the airline plans on drawing down the facility by the end of February 2021.
Next, British Airways has reached a deal with the Trustee of New Airways Pension Scheme (NAPS) to defer £37.5 million of monthly pension deficit contributions which were due between October 2020 and September 2021, for a total value of £450 million. Repayment of the £450 million, with interest, will now be added to the end of the existing Recovery Plan as monthly payments from March 2023. British Airways has provided property assets as security until the deferred compensation has been repaid. Additionally, the carrier will not pay dividends to IAG before the end of 2023 and any dividends paid after that point will be matched by a NAPS contribution of 50 percent of the value of dividends paid. A new Recovery Plan will be based on a triennial valuation as of March 31, 2021, and if the plan hasn’t been adopted by September 30, 2021, British Airways will be required to continue making £37.5 million monthly payments to NAPS from October 2021.
The New Airways Pension Scheme (NAPS) opened on April 1, 1984 and was closed to new joiners on March 31, 2003, and to future accruals on March 31, 2018. The current Recovery Plan is based on the March 2018 triennial evaluation, which resulted in a deficit of £2.4 billion. Under the current plan, British Airways is required to make annual fixed deficit contributions £450 million through March 2023. Since March 2018, the airline has paid £1.34 billion in NAPS contributions, including £263 million in 2020.