TUI Group has launched a rights issue to raise around €545m to pay down debt and strengthen the group’s liquidity position.
TUI said it would use €314m to repay 2016 notes plus accrued interest. It will use the remaining cash to strengthen its continuing liquidity.
In a new year letter, CEO Fritz Joussen said: “If you ask people what they missed in the pandemic year, one thing often tops a long list: travel. At the beginning of the new year, continents and countries are more isolated from each other than they have been for many decades, borders are closed, government restrictions limit the freedom to travel. Nobody wants that, and it won't stay that way in the long run. Travelling is recreation and relaxation. That is important – holidays are a very intensive time of the year, especially for families, to find each other, free from the constraints of everyday life.
“But travel is so much more. Travelling broadens one's horizons and creates space for new encounters. When we travel, we realise what makes cultures unique – but above all what connects us across all regions of the world. There is no substitute for personal experiences and encounters while travelling.
“As painful as the governmental travel restrictions were, they were especially important at the beginning of the pandemic to bring the infection under control. In the meantime, there are reliable tests that can create safe travel corridors, and effective vaccines that have been applied worldwide since the end of December. I hope we will use all opportunities in the new year to get back to open borders as soon as possible.”
The raising was part of a €1.8bn package agreed with the support of the Economic Support Fund, KfW, its banks and the largest single shareholder Unifirm - the Mordashov family.
Including the additionally agreed financial package, TUI had financial resources and credit facilities of €2.5bn.
The group said it was taking further precautions in view of the rising number of infections since autumn, strict travel restrictions in many countries and the resulting shorter booking times of customers.
The financial package was intended to ensure that the company could bridge the gap if the pandemic persisted in 2021.
Joussen said: "Before the Corona pandemic, TUI was a very healthy company. The market is intact, the demand is there. But we have not been able to generate any significant revenues since March. Our integrated business model allows us to react very flexibly to short-term changes in the pandemic situation, just as we successfully ramped up our travel programme for a few weeks in July after the first wave. People want to travel, tourism remains a growth industry and an important sector for stabilising the southern euro area.
“The financial package provides the security to look consistently ahead and to prepare the group strategically and structurally for the time after the pandemic. With these measures, the group is securing liquidity for a continuing pandemic in 2021, while at the same time improving our balance sheet structures in the long term.”
Insight: Aside from the green-eyed monster that TUI’s stacking up of government-backed greens raises in regions such as the UK provokes, it does the wider sector good to see one of its own getting the backing of the people with the cash. There’s hope for everyone.
And hope in particular for those who may have thought that the travel agent model was dead, because, say what you fancy about distribution, but they don’t half bring the tourists in and they keep the OTAs and the hotel brands honest.
One of the issues which the sector would like to avoid when All This is over is power in the hands of a fewer players, whoever they may be. TUI may take a large share of the traditional agent model, but it is balanced by the rest of the market.