BA raises £615 million to avert cash crisis

By John Bowker and Myles Neligan

LONDON (Reuters) - British Airways unveiled a $1 billion (615 million pounds) fundraising aimed at securing its future on Friday, including $540 million in bank loans that had been earmarked for its pension funds as a safety net against the airline going bust.

The cash removes any immediate threat to the struggling carrier as it endures one of the aviation sector's worst ever downturns coupled with competition from budget carriers, Chief Executive Willie Walsh told reporters.

BA shares closed up 3 percent at 136 pence, having fallen nearly 70 percent in value over the past year.

The company, with a pension deficit estimated at over 3 billion pounds, said pension fund trustees had agreed the best way to prevent BA going to the wall was for bank guarantees provided in 2006 to be handed back.

These guarantees were accessible by the trustees only in the event of the airline's insolvency.

BA also said it had raised 350 million pounds through an offering of 5.8 percent convertible bonds. Convertible into 15-20 percent of the airline's shares, the conversion price was set later on Friday at 189 pence per share, a premium of 38 percent over the average price of its shares between the launch of the offer and its pricing.

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"This ensures that in all but the most extraordinary circumstances BA will emerge from the downturn intact and without issuing too many shares (via a rights issue)," Evolution analyst Nick Cunningham said. "It is a very good compromise."