Bankia SA (BKIA), the Spanish banking group bailed out by the government last year, said it has sold its stake in British Airways parent IAG SA (IAG), exiting a holding obtained in the 2011 merger of the U.K. airline with Iberia.
The company’s Bankia Bolsa SA brokerage arm placed 224.3 million IAG shares at 256 pence each, it said in a statement, valuing the transaction at 574.2 million pounds ($880 million). The stock sold corresponds to a 12.09 percent stake in IAG, which closed at 264 pence yesterday in London.
IAG Chief Executive Officer Willie Walsh has said that there was no longer strategic value in having the bank as an investor, and he predicted Bankia would exit to focus on its main operations. Walsh has sought to accelerate the integration of Iberia into the combined group with a cost-cutting plan that includes the elimination of thousands of jobs in Spain.
“The overhang has been removed and that’s a positive for IAG,” said Stephen Furlong, an analyst at Davy Holdings in Dublin, who rates the stock “outperform.” “IAG has moved along as a restructuring story, not just at BA, which addressed its issues before anyone else, but also at Iberia, where the restructuring has been immediate, radical and necessary.”
IAG, known in full as International Consolidated Airlines Group SA, fell as much as 7.7 pence, or 2.9 percent, to 256.5 pence. The stock has gained 40 percent this year.
The disposal announced yesterday coincided with IAG’s plan for a bond sale that uses its new aircraft as collateral. IAG said that six Boeing Co. (BA:US) 787 Dreamliners are part of collateral in the placement of a $927 million asset-back bond, along with two Boeing 777-300ER long-range jets and six Airbus SAS A320 short-haul planes due for delivery through next June.
The Class A certificates, worth $721.6 million, have an annual coupon of 4.625 percent, with Class B certificates, valued at $205.4 million, carrying a 5.625 percent coupon, London-based IAG said yesterday.
“This transaction marks a strategic milestone as we diversify our sources of funding,” Chief Financial Officer Enrique Dupuy said in a statement, adding it marks BA’s first use of so-called enhanced equipment trust certificates.
The method of selling bonds backed by aircraft is more common in North America. In April, Air Canada (AC/B) announced a private offering of 2 tranches of enhanced equipment trust certificates secured by five new Boeing 777-300ER. American Airlines sold bonds in March backed by single-aisle Boeing’s as well as larger wide-body airliners by the U.S. manufacturer.
Bankia, Spain’s fourth-biggest banking group, said the exit marks a step toward the completion of a three-year plan presented on Nov. 28. The company got about half of the 41 billion euros in European aid sought by Spain last year, as it reported a a record 19 billion-euro annual loss.
The retreat from IAG “stipulates, among other things, the divestment of non-strategic units, including the portfolio of holdings,” Bankia said yesterday.
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