TUI Looking At New Equity And Divestments To Cut COVID-19 Debt Pile
Travel firm TUI has said that it is considering raising new equity from shareholders or selling off parts of the business to reduce debt taken on to survive the coronavirus pandemic.
TUI, which took 23 million people on holiday last year, lost €1.1 billion during the three months through June after COVID-19 halted travel, wiping out revenue and straining its balance sheet as it burned through about €550 million to €650 million per month.
It secured a second credit line from the German government on Wednesday August 12, adding to a €1.8 billion state-backed loan taken on in April, and while the CEO said that it might not need to use the latest line, the focus is now on debt.
"A rights issue or whatever kind of measure is something we are looking at," CEO Fritz Joussen told reporters.
Asked how big a rights issue could be, Joussen said that it is "early days", and he did not say which parts of the business are up for sale, although he insisted that any sales will not be distressed.
The state loans are due to be repaid in summer 2022 and banking sources have suggested that TUI could sell all or part of its 49% stake in the Spanish hotel chain RUI Hotels & Resorts.
With the latest German aid package, TUI said that liquidity is €2.4 billion, giving it confidence that it can make it through to 2021 even as the pandemic continues to hit travel, and as it approaches winter when holiday companies generally lose money.
TUI said that it expects normality to return by 2022, and that it is encouraged by bookings for summer holidays next year, which are up 145%. Analysts are sceptical.
"We think plans to reduce leverage in 2021 and reach normalised profit growth in 2022 are ambitious," said Jefferies.
Shares, Operating Loss, Revenues, Bookings And Cost Cuts
The company's London-based shares fell by 5% to 347 pence. The stock has lost 63% of its value in the year to date.
TUI's quarterly underlying operating loss of €1.1 billion as revenues plummeted 98.5% to €72 million euros compares with earnings before interest and tax (EBIT) of €102.3 million during the same period last year.
Bookings for this summer are down by 81% from last year and Joussen said that the situation is still "fragile". TUI's recovery was set back by new UK restrictions on travel to Spain.
The company said that it is making progress with the cost cuts needed to help it withstand the crisis. It warned in May that it would need to axe 8,000 jobs and save €300 million a year.