Tui has secured €400 million via a convertible bond as Europe’s largest travel company continues to try and contain the impact of the pandemic on its business.
The Germany-based group said on Friday that the proceeds would be used “to further improve [the] liquidity position as the Covid-19 crisis continues and subsequently for the repayment of existing financing instruments”.
Fritz Joussen, Tui’s chief executive, said the bond’s twofold oversubscription was a “remarkably positive” sign of investors’ “renewed confidence” in Tui.
“Just nine months ago we couldn’t even finance ourselves on the capital markets and now we are looking at a complete change of events,” he added.
Tui has gone through a series of refinancing deals as the pandemic has progressed. The latest was a €1.8 billion package, announced in December, which included a €500 million rights issue and backing from Germany’s state-backed economic support fund.
Tui, which sells holidays to 180 countries, has suffered heavy losses during the pandemic. The tour operator reported a €3.2 billion pretax loss in the year to the end of September.
Mr Joussen confirmed that Tui had sufficient liquidity to see out the summer, adding that he was encouraged by a rise in US bookings and how Europe’s vaccination programme is gathering pace.
“The UK [vaccine rollout] is already in a good place and other countries across Europe are not far behind, so the borders will open soon and holidaymakers will be keen to spend,” he said.
‘Mood music pessimistic’
However, Richard Clarke, an analyst at Bernstein, said recent announcements about holidays from politicians in Germany and the UK, Tui’s two biggest markets, looked like a “net negative” for the travel operator.
“The mood music for Tui is looking pessimistic in both countries,” Mr Clarke said. “In Germany, foreign travel has been scorned by politicians in the media, while the UK government has confirmed summer holidays will require a PCR test. Both of these moves will hit Tui’s bookings.”
Tui’s share price fell more than 7 per cent in early trading in London before rallying to close down 2.1 per cent at 389p.
The uneven rollout of vaccines and a new wave of cases and lockdowns in Europe have stalled a surge in summer holiday bookings, damping industry hopes for 2021.
Between early February and late March, confirmed bookings for summer 2021 remained stagnant at 2.8 million, with 180,000 additional bookings during the period counteracted by a rise in cancellations.
Stuart Gordon, leisure analyst at Berenberg, said despite the extra liquidity from the bond Tui’s cash position would be “tested” later in the year.
“Tui is burning €250 million to €300million a month and that’s a big problem,” Mr Gordon said. “If nobody goes on holiday, they will run out of money by October. However, even if they have a good summer, many of their customers will be using vouchers from last year, meaning cash to pay suppliers towards the end of the year could be tight.”– Copyright The Financial Times Limited 2021