Iberia's Aerolineas Stake Diluted, May Clear Way For IPO

By Robert Duncan

5 December 2000

Dow Jones International News

A capital increase by a key investor in Aerolineas Argentinas will provide Spain's flagship airline Iberia SA (E.ILA) with a convenient way to divest its stake in the troubled Argentine airline and, at the same time, remove a stumbling block to its own initial public offering.

Intervest, which controls 85% of Aerolineas Argentinas, held a $552.5 million capital increase Nov. 24 in which institutional investors have around 15 days from that date to participate in the operation. Airline workers and the Argentine government, respectively, hold the remaining 10% and 5% stakes in Aerolinas.

Intervest is controlled by Iberia, AMR Corp.'s (AMR) American Airlines and Andes Holding, which in turn is controlled by Spanish state holding company Sociedad Estatal de Propiedad Industrial, or SEPI.

SEPI, which recently devised a $650 million package to save the Argentine airline from bankruptcy, inherited the Aerolineas debt when the Spanish government began preparations to privatize Iberia.

Iberia officials, however, say the airline won't participate in Intervest's $552.5 million capital increase, which in effect will lower Iberia's stake in the Argentine airline to 0.3% from 8.5%.

"I don't know anything about the period (of subscription), but I can tell you that at this moment Iberia only has a 0.3% stake in Aerolineas," an Iberia spokeswoman said.

Intervest's capital increase will also force SEPI to raise its stake in the Argentine airline.

Officials at neither SEPI or Iberia could provide specific details of when the subscription period will end, although it could be as early as Saturday Dec. 9, or up to Dec. 17 if holidays and weekends are taken into account.

At one time, Iberia controlled nearly 85% of Aerolineas, saddling it with around $500 million in debt by the mid-90s, and seriously threatening Iberia's own existence.

Iberia's removal from Aerolineas's shareholder structure appears to be one less hindrance to the government's attempts to privatize the Spanish airline company. Its IPO was originally due to be held in 1999.

Government officials have cited several reasons for the IPO's delay, among them the Aerolineas case, poor market conditions, and air pilots' strikes. More recently, they have cited Iberia's acquisition plans. Iberia is studying a bid for U.K. budget airline Go, and has held talks with Spain's largest privately owned carrier Air Europa.

The Spanish government sold last March a 40% stake in Iberia to seven partners - all institutional investors - for EUR1.09 billion, valuing the company at EUR2.73 billion.

The partners include American Airlines which holds a 1% stake and British Airways PLC (BAB) which holds 9%, as well as savings bank Caja de Madrid and banking giant Banco Bilbao Vizcaya Argentaria SA (BBV) with 10% and 7%, respectively.

An additional 6% stake was sold to Iberia workers.

It's widely expected the Spanish government may offer its remaining 54% stake in Iberia sometime before the second half of 2001.