IAG has successfully completed a $650 million fully underwritten institutional placement, as the company looks to compensate for an anticipated $865 million hit from pandemic-related business interruption claims.
A NSW Court of Appeal ruled last week that insurers could not decline business interruption claims due to incorrectly worded exclusions for “quarantinable diseases.”
The group’s Chief Executive Officer Nick Hawkins said “significant judgment” had been exercised in deriving the $865 million provision estimate, which has since been subject to independent peer review and includes a risk margin to derive a 90% level of confidence for the group’s total outstanding claim liabilities.
To achieve its proposed capital raise, IAG opted to bring in $750 million of new equity capital from the combination of a $650 million fully underwritten institutional placement raise at a fixed price of $5.05 per new share, and a non-underwritten retail share purchase plan targeting up to $100 million.
IAG says it received significant interest in the placement from both domestic and offshore institutional investors.
Eligible shareholders who bid for an amount less than or equal to their ‘pro rata’ share of placement shares were allocated their full bid, IAG says.
The company says it has sought to prioritise allocations for the remaining shares based on factors including the likelihood of long-term support, the strategic alignment of the investor and the timeliness and volume of investors’ bids into the book.
The placement shares will rank equally with existing IAG ordinary shares and are expected to settle on Wednesday 25 November.
IAG will also offer existing eligible retail shareholders the opportunity to participate in a non-underwritten SPP to raise up to $100 million.
Shareholders with a registered address in Australia or New Zealand will have the opportunity to apply for up to $30,000 of shares without incurring brokerage or transaction costs.
The shares issued under the SPP will rank equally with existing IAG shares from the date of issue.
IAG may accept applications (in whole or in part) that result in the SPP raising more or less than $100 million at its absolute discretion.