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Fully underwritten rights issue

Direct News Source

Strengthening the balance sheet and capitalising on long-term strategic and growth opportunities

Fully underwritten rights issue to raise £1.2 billion and new committed $400 million secured revolving credit facility

easyJet plc ("easyJet", the "Group" or the "Company"), today announces a fully underwritten rights issue to raise gross proceeds of approximately £1.2 billion (the "Rights Issue"). In conjunction with the Rights Issue, the Company has also agreed commitments for a new four-year senior secured revolving credit facility of $400 million.

Summary

· As part of a review of its capital structure, the Board has concluded that raising additional equity will protect and strengthen easyJet's long-term positioning in the European aviation sector. As a result, the Company is launching a Rights Issue, the net proceeds of which are expected to:

‒ Facilitate and accelerate the Group's recovery from the impact of the COVID-19 pandemic by providing resilience from downside risks (should the COVID-19 pandemic continue to dampen or delay the recovery of passenger volumes over the next 12 months); and

‒ Materially improve easyJet's ability to deliver long-term value to shareholders through providing the Group with the flexibility to take advantage of long-term strategic and investment opportunities expected to arise as the European aviation market emerges from the COVID-19 pandemic

· Having acted decisively over the last 18 months, easyJet is well-placed to emerge from the pandemic with renewed strength the potential to capitalise on growth opportunities that will create value for shareholders

· The Company expects considerable long-term strategic and investment opportunities to arise as the European aviation market recovers, in particular as legacy carriers restructure their short-haul operations, providing the chance to:

1) further develop the Group's current position of strength, in particular through its existing structural advantages in easyJet's primary airport network in the high value Western European markets;

2) gain greater benefit from the step changes being made in its ancillary product portfolio and easyJet Holidays; and

3) continue to invest in sustainability

· The Group's ability to capitalise on these opportunities is supported by its strong brand and customer proposition as customers look to brands that they can trust and that can offer them the best value

· These key strengths and opportunities, alongside the Group's continued focus on its people and on operational and digital safety, are expected to provide the Group with the tools to grow to pre-pandemic capacity by 2023, as well as achieve strong returns and resilience as the recovery builds, with the medium-term goal of achieving mid-teen EBITDAR margins and low to mid teen ROCE

· Alongside the Rights Issue, the Group has also secured new bank financing commitments, which will further strengthen the Company's liquidity position as the airline recovers from the COVID-19 pandemic. This consists of a new secured $400 million revolving credit facility ("RCF"), which will have a tenor of four years with an additional two-year extension option at lender consent, conditional on the completion of the Rights Issue

Use of proceeds

The Group expects the net proceeds of the Rights Issue to deliver value for Shareholders through:

· Enhancing balance sheet strength and resilience: The Rights Issue will help restore the Group's balance sheet position to pre-COVID-19 pandemic levels, to enhance the Group's liquidity, and to strengthen its investment grade balance sheet. An enhanced balance sheet will provide greater financial flexibility and resilience to withstand potential prolonged market challenges related to the COVID-19 pandemic, including a potential downside scenario with continued travel restrictions in 2022 and/or a slower recovery in travel patterns.

· Providing the flexibility to capture strategic growth opportunities: As the European travel market emerges from the COVID-19 pandemic, a range of long-term strategic and investment opportunities are expected to arise. The Rights Issue will provide the Group with the financial flexibility to take advantage of these growth opportunities and deliver long-term value:

1) Building on structural advantages: The Group currently holds a leading strategic position in attractive, high value Western European markets based on scale in primary airports with high income catchment areas. Furthermore, the Group is positioned in many markets as the leading low-cost brand based on its unique combination of convenience and customer service. As the European aviation market recovers post-COVID-19, opportunities will arise at airports within these markets, many of which are slot constrained, as legacy airlines restructure short-haul operations and regulators impose remedies in response to state aid. The Rights Issue will enable the Group to capture these investment opportunities, to build on its current position of strength, and to deliver value-accretive growth.

2) Gaining greater benefit from ancillary revenue and easyJet Holidays: Over the last 24 months, the Group has implemented an important series of initiatives that has allowed easyJet to add incremental revenues, and the Group recognises that the continued evolution of its product portfolio, supported by the Rights Issue, represents a significant opportunity to increase revenue per seat and margins in the coming years. This includes continuing to build on the success of the launch of easyJet Holidays, which the Group considers a key driver of incremental profitability and revenue growth.

3) Investing in sustainability with new generation aircraft: Throughout the pandemic, sustainability, and in particular, carbon emissions have become increasingly important to customers. The Group currently holds a market leading position in Europe, having been the first major airline in the world to offset the carbon emissions from the fuel used for all of its flights using high quality accredited offsets and continuing to be the only major European airline to do so. It also has one of Europe's largest fleets of next generation narrow-body aircraft which are 15% more fuel efficient and 50% quieter during take-off and landing than the equivalent previous generation aircraft. To maintain its leadership position in this area, and supported by the Rights Issue, the Group will continue to invest in its fleet, including in new fuel-efficient aircraft, to improve its carbon and cost efficiency through the replacement of existing aircraft that provide less fuel and operational efficiency.

Entering into the new RCF concurrent with the Rights Issue, together with maintaining a prudent and proactive capital management policy, will be supportive towards the strategy of maintaining a liquidity buffer and also enhance balance sheet resilience against potential prolonged market challenges related to the COVID-19 pandemic.

Johan Lundgren, Chief Executive of easyJet said

"The capital raise announced today not only strengthens our balance sheet enabling us to accelerate our post-COVID-19 recovery plan but will also position us for growth so that we can take advantage of the strategic investment opportunities expected to arise as the European aviation industry emerges from the pandemic.

"Since the onset of the pandemic, we have undertaken decisive and robust action to restructure our operations, addressed our cost base and secured our financial position, keeping our investment-grade credit rating. We have worked hard to maintain our customer friendly brand and network and been rewarded with immediate growth in demand when travel restrictions have been lifted.

"This capital increase will allow us to build on our fundamental operational strengths and network strategy for our customers as well as accelerate long-term value creation for our shareholders."

Summary background to the proposed Rights Issue

easyJet entered the pandemic with a strong balance sheet, which enabled the Group to take swift action, raising over £5.5 billion of additional liquidity from a diversified range of funding sources and minimising cash burn through disciplined capacity allocation and a strong focus on cash generative flying to help mitigate the impact of the COVID-19 pandemic on the business.

In response to the unprecedented impact COVID-19 has had on the airline industry, easyJet has taken decisive action to transform the airline:

· Costs: easyJet has undertaken its largest ever cost-out programme which will deliver substantial cost reductions going forward and address legacy cost inefficiencies by providing greater crew flexibility, with the objective of ensuring that the Group emerges from the COVID-19 pandemic with a significant cost advantage compared to legacy carriers. easyJet is on track to achieve approximately £500 million in savings in the financial year ending 30 September 2021, of which the Directors expect almost half will be sustainable on an ongoing basis, with cost actions for the financial year ending 30 September 2022 already underway

· Network / Schedule flexibility: easyJet's leading network of primary airports across Europe's biggest cities has been a key advantage throughout the pandemic. The strong flexibility built into our schedule has enabled easyJet to pivot capacity towards popular routes showing rising customer demand and to focus on positive contribution flying, with the expectation that this will lead to a material improvement in underlying revenue per seat performance as traffic returns to pre-pandemic levels

· Ancillary revenue: easyJet has delivered a step change in its ancillary product portfolio, with our updated cabin bag policy implemented in February and the second phase of that project launching later this year, as well as our bundled 'Standard Plus Fare' performing well. The Group expects that the continued evolution of its product portfolio represents a significant opportunity to increase revenue per seat and margins in the coming years

· easyJet Holidays: Represents a material opportunity to continue to enhance the Group's presence in a market with attractive structural growth potential that is complementary to the core business, and is expected to be a key driver of incremental profitability and revenue growth, with a clear roadmap to contributing annual profit before tax in excess of £100 million

However, the current trading environment remains uncertain and the Group has continued to review its long-term capital and liquidity needs. As part of this review, the Board has concluded that raising additional equity will protect easyJet's long-term positioning in the European aviation sector and support growth as new opportunities arise from the COVID-19 pandemic. As a result, the Company is therefore launching a Rights Issue.

Update on trading

In August 2021, UK domestic capacity was at 105% of 2019 levels with a load factor of 82%, whist intra-EU capacity was at 81% of 2019 levels with a load factors of 85%, demonstrating the strength of the Group's UK domestic and intra-EU flying schedule.

The Directors expect the Group's capacity in Q4 2021 to be approximately 57% of Q4 2019 levels, which is a significant increase compared to Q3 2021, when easyJet flew 17% of Q3 2019 capacity. During Q4 2021, the Company expects to increase capacity allocation and improve expected load factors on both UK domestic and intra-EU flying, with UK domestic capacity already at pre-pandemic levels.

Looking into Q1 2022, the Company currently expects to fly up to 60% of Q1 2019 capacity with a continued focus on profitable flying.

Directors' intentions

Each Director who is a Shareholder has irrevocably undertaken to either take up and subscribe in full for their entire right to subscribe for New Shares in the Rights Issue or sell a sufficient number of Nil Paid Rights to meet the cost of taking up the balance of their entitlement to New Shares.

Possible offer

The Board recently received an unsolicited preliminary takeover approach. This was carefully evaluated and then unanimously rejected. The potential bidder has since confirmed that it is no longer considering an offer for the Company.

The indicative proposal took the form of a low premium and highly conditional all-share transaction which, in the Board's view, fundamentally undervalued the Company. In deciding to reject it, the Board took into account all relevant factors including the highly conditional nature of the proposal and the certainty and strategic opportunity that the Rights Issue presented to the Company.

This is not a statement to which Rule 2.8 of the Takeover Code applies.

Prospectus

The prospectus containing full details of the Rights Issue is expected to be approved by the Financial Conduct Authority (the "FCA") in the UK (the "Prospectus") and made available on the Company's website (https://corporate.easyjet.com/investors/rights-issue) later today.

The Company also intends to launch the Rights Issue in France, Germany, Italy and Spain. In this respect, a prospectus will be submitted to the Autorité des Marchés Financiers (the "AMF") in France for approval and, subject to such approval, will subsequently be passported in Germany, Italy and Spain in accordance with the Regulation (EU) 2017/1129.

Indicative summary timetable

Record Date for entitlements under the Rights Issue

6:00 p.m. on Wednesday 8 September 2021

Date of dispatch of Provisional Allotment Letters or CSN Forms of Instruction (to Qualifying Non-CREST Shareholders only)

Friday 10 September 2021

Admission and dealings in the New Shares, nil paid, commence on the LSE and Existing Shares marked ex-Rights

8:00 a.m. on Monday 13 September 2021

Latest time and date for acceptance, payment in full and registration of renounced Provisional Allotment Letters

By 11:00 a.m. on Monday 27 September 2021

Expected date of announcement of results of the Rights Issue through a Regulatory Information Service announcement

By 8:00 a.m. on Tuesday 28 September 2021

Dealings in the New Shares, fully paid, to commence on the LSE

By 8:00 a.m. on Tuesday 28 September 2021

The Rights Issue is fully underwritten with BNP Paribas, Credit Suisse and Goldman Sachs acting as Joint Global Coordinators and Santander and Société Générale acting as Joint Bookrunners. BNP Paribas and Greenhill are acting as joint sponsors to the Company. Greenhill is acting as financial adviser to the Company.

The Rights Issue is being conducted within the parameters of the authorities conferred upon the Company by Shareholders at its annual general meeting on 23 December 2020 and, as such, does not require the approval of Shareholders in a general meeting or otherwise.

Analyst presentation

An analyst presentation will take place at 08:15am BST today. To join, please dial +44 33 0551 0200 and quote 'easyJet' when prompted by the operator. The slides accompanying the presentation will be available on easyJet's website, http://corporate.easyjet.com/rights-issue.

This press release was sourced from easyJet PLC on 09-Sep-2021.