Maximise your Avios, air miles and hotel points

IAG raises a further €1.2 billion via a junk bond issue

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

IAG, the Spanish-based parent company of British Airways, announced a new fund raising on Thursday.

During the day, the company raised a further €1.2 billion via a bond sale. The money will be repaid in two tranches:

  • €500 million to be repaid in March 2025
  • €700 million to be repaid in March 2029
IAG raises €100m via bond issue

For clarity, the bonds are only for sale to institutional investors and not to the general public.

The four year bonds were issued with a coupon of 2.75% (down from a proposed 3.25% at the start of the day). The eight year bonds were eventually priced at 3.75%, down from a proposed 4.25%.

Despite the cut in the coupon, it is still above the European average for junk-rated corporate debt of 2.59%. The bonds are rated B1, which is a ‘junk’ rating.

For a quick comparison, the typical five year fixed rate UK savings account is currently paying 1% to 1.25%. There would be considerable demand – albeit with considerable risk compared to a savings account – if similar £-denominated bonds were offered to UK private investors.

As we covered, British Airways saw its debt drop into ‘junk’ territory last year.

The stated purpose of the fund raising is to “include but not be limited to”:

  • strengthening the Group’s balance sheet and increasing the Group’s overall liquidity position
  • helping the Group withstand a more prolonged downturn in air travel
  • providing the Group with the operational and strategic flexibility to take advantage of a recovery in demand for air travel

The official announcement is on the IAG website here.

How to earn Avios points from UK credit cards

How to earn Avios from UK credit cards (October 2021)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

There are two official British Airways American Express cards. Both have increased sign-up bonuses until 2nd November 2021:

British Airways BA Amex American Express card

British Airways American Express

10,000 Avios for signing up, no annual fee and an Economy 241 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

40,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points, such as:

Nectar American Express

American Express Preferred Rewards Gold

Your best beginner’s card – 30,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

60,000 points and an unbeatable set of travel benefits – for a fee Read our full review

The 30,000 points bonus on Amex Gold runs to 9th November 2021. The 60,000 points bonus on The Platinum Card runs to 2nd November 2021.

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card:

Capital On Tap Business Rewards Visa

The most generous Avios Visa or Mastercard for a limited company Read our full review

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies. This card has a limited time offer of 60,000 Avios when you sign up:

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

60,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

(Want to earn more Avios?  Click here to visit our home page for our latest articles on earning and spending your Avios points and click here to see how to earn more Avios this month from offers and promotions.)

Comments (26)

  • mr_jetlag says:

    Rob were you DCM in your old bank? There are a ton of macro reasons this is not an excessively “high yield” coupon. Carnival bond is at 5.75% for instance.

    • Rob says:

      I am just comparing to the European junk bond (corporates) average yield.

      Given IAG’s current cash pile it isn’t as risky as Carnival.

      • mr_jetlag says:

        I suspect they also looked at the recent uptick in 10y treasuries and priced accordingly. Agreed Carnival is a much riskier play (so it was smart of them to refinance earlier).

    • Bagoly says:

      In a few year’s time we will look back and see how ridiculous it was that 4% was considered “high-yield”!

      • Rob says:

        15 years ago I was getting 7% on money in the bank. If I was getting that now my lifestyle would be very different!

        • mr_jetlag says:

          I was doing 6.25 in Icesave…

        • Mr(s) Entitled says:

          It would be remarkably different because you wouldn’t have ridden a low cost to carry debt fueling an ever inflating asset bubble.

  • Lady London says:

    How liquid are corporate bonds like these once bought?

    Are transaction charges to buy or sell onerous?

    • mr_jetlag says:

      LL – lots of buysides will trade secondary market corp bonds, either OTC or on exchange. If you’re asking as a retail investor, these aren’t typically available and you would either need to gain exposure via a bond ETF (which comes with entry fees, charges etc – not as much as a BA ticket but still 1-2%) or a HY bond fund.

    • Benilyn says:

      £100k min denom (at least the other IAG bonds are). But relatively liquid if we are talking those sizes… Interactive Brokers should let you buy for PA (you can check if you can buy existing IAG bonds).

      Final pricing E500m 4Y @ 2.75% and E700m 8Y @ 3.75% and order books >E5bn

      • Benilyn says:

        And just to note, if you are GBP currency native and buy these EUR bonds… you could easily lose a lot due to FX since upside is relatively limited on this bonds given tenor and vs equity where upside is uncapped. So be careful…

        • Sloth says:

          Surely if you were realistically looking to buy these you would just enter into an fx swap to remove the ccy exposure

  • Howard says:

    May be a silly question but why not make it available to the general public if it will bring the yield down? I assume it’s got something to do with additional compliance etc.

    • JDB says:

      Takes much too long as needs full prospectus and the offer to be open for a fair period etc. and usually has fairly high minimum order size that would stop most people being interested.

      • C says:

        Moreover, most / all banks involved in the sale will not have their legal and compliance procedures set up to sell to retail investors, even were they to go through the formal regulatory hurdles. In the UK, retail investors are largely overlooked in the primary distribution of securities, both equity and debt.

      • Magneto says:

        A full prospectus has been produced for the issuance. Institutional investors won’t just invest a billion euros without a prospectus…

    • Rob says:

      For a retail investor, in theory the yield should be even higher.

      A pension fund has to choose between negative yield on bonds or 4% here. You can still get 0.5% on some savings accounts, so realistically you’d want a 1% higher return on the IAG debt to compensate.

  • JonD says:

    Optimistically I’m hoping this is fundraising to allow IAG to aggressively expand once air travel resumes rather fighting for survival now.

  • Chris Heyes says:

    JonD I think you’ll find that IAG are relatively safe from going under at a guess IAG 10% Chance of going under.
    Compared with Virgin probably at around 70% Chance of going under now they have agreed some new money

  • BuildBackBetter says:

    Not sure if covered already, BA looking to sell their Heathrow office (waterside)

  • Lady London says:

    That repricing was smart. Have been so long out of the City took a guess : Yes it’s the usual suspects Morgan Stanley and Goldman running it… not much changes.

    2 Spanish banks on there too. Just to remind us who really owns IAG.

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.