British airline easyJet will be using around $2 billion for expansion after it said Thursday it would raise $1.7 billion from shareholders to fund its pandemic recovery and expand operations. It also announced a new committed $400 million secured revolving credit facility.
EasyJet said it would use the rights issue to strengthen its balance sheet and also to take advantage of growth opportunities that arise from the expected recovery in Europe's aviation market over the coming years.
It also announced a new committed $400 million secured revolving credit facility. The news spooked investors who offloaded the company's shares leading to a loss of 10 percent in early trading.
Neil Wilson, chief market analyst at Markets.com, said: The airline's need for fresh capital is "a sign of the ongoing trouble in the sector".
It wants to steal market share from legacy carriers like British Airways-owner IAG, once a rumoured suitor of easyJet, and Air France-KLM as they restructure their short-haul operations.
Chief Executive Johan Lundgren said the capital raise would enable the airline to accelerate its post-COVID-19 recovery plan and position it to take advantage of strategic investment opportunities, such as expanding its presence at key airports by buying more landing slots.
It has identified landing slots across Europe it could acquire, including in Paris, Amsterdam and Milan.
"I believe this is really a once in a lifetime opportunity," Lundgren said.
"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," he said.
Under the rights issue, shareholders will be able to buy 31 new shares for every 47 existing shares at a price of 410 pence each, a 35.8 percent discount on the theoretical ex-rights price of 638 pence per share on Sept. 8, easyJet said.
The budget airline said it had rejected a takeover offer, reportedly from low-cost rival carrier Wizz Air on Thursday. The company said the all-share approach fundamentally undervalued the business. It said the potential bidder had since stated that it was no longer interested in a deal.