easyJet has just announced that it has taken £600m in funding from the Government to keep it in the air (or not in the air, technically).
The money was raised using the Covid Corporate Financing Facility which allows companies to borrow money from taxpayers. The terms are meant to match those that the company could have got a few weeks ago from the public markets, as opposed to what it would have to pay today.
easyJet has also told its banks that it intends to fully draw down a $500m loan which had been agreed but never actually executed.
The airline believes that, once these two loans are drawn at the end of this week, it will have £2.3 billion of cash on hand.
The airline also announced that it has agreed a furlough deal with its pilots, although details have not been released. There is already a furlough deal in place for cabin crew and training instructors.
Johan Lundgren, easyJet CEO said:
“We remain absolutely focused on ensuring the long-term future of the airline, reducing our costs and preserving jobs, to make sure easyJet is in the best position to resume flying once the pandemic is over. We are pleased that we have now reached agreement with both Unite and BALPA regarding furlough arrangements for UK-based easyJet pilots and crew.”
“Our current priority is to safeguard short term liquidity, so we have borrowed from the CCFF and drawn down on our Revolving Credit Facility in order to increase our liquidity in the event of a prolonged grounding of the fleet.”
“The CCFF provides businesses with access to funds at the commercial rates which were available before the coronavirus crisis and any UK company that had an investment grade rating before the crisis can apply for this funding.”
This doesn’t help Virgin Atlantic though …..
If you thought that this deal may be a template for a Virgin Atlantic funding package, it isn’t.
Virgin Atlantic does not have any rated debt – investment grade or non-investment grade – as far as I can tell. This means that it cannot access the Covid Corporate Financing Facility.
For non financial types, it is roughly equivalent to the Government taking over all credit card issuance, but only accepting new applications from people who already had cards and were repaying them promptly in the days before the Government took over. If Virgin Atlantic had issued even a small amount of rated tradeable debt – £50m or so – as opposed to standard bank loans, it would qualify to raise money via the same route as easyJet.