The International Airline Group Rights Issue

This case is about the IAG capital increase, in the aftermath of the COVID-19 crisis. COVID-19 had totally changed the airline sector, and worldwide all airlines were in despair. IAG was badly in need of additional capital. International Airlines Group (IAG), the owner of airlines such as Iberia and British Airways, had announced a capital increase, through a rights issue. According to the Board, the capital increase of almost ? 3 billion was designed to: ? enable IAG to strengthen its balance sheet and reduce leverage (to offset the ?2.9bn increase in net debt since the start of COVID-19); ? enhance liquidity and help IAG withstand a more prolonged downturn in air travel based on IAG's stressed, downside scenario planning; ? provide IAG with the operational and strategic flexibility to take advantage of a recovery in demand for air travel The proposal was to increase capital through 2.97 billion new shares to be issued. The subscription price will be ?0.92 for each New Share (a substantial discount to the closing price of the shares pre-announcement). Preference was given to existing shareholders: for each existing share of IAG, shareholders would receive one subscription right. The Board of Directors had unanimously approved it. However, the final step was to gain shareholders? approval. With many routes and borders still closed, business tourism not picking up, and a dim scenario for the sector, it was unclear how they would react.