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Cit bankers earn their keep (for once) as companies seek funds

Simon English
·1-min read
<p>TUI bonds will pay up to 5%.</p> (PA Wire)

TUI bonds will pay up to 5%.

(PA Wire)

To which business would you rather lend money, the foreign holiday giant or the online shopping whiz?

That you know the answer straight away tells us a lot.

Today ASOS launched a £500 million bond offering for cash to invest in the future for which it is offering interest of 0.75% -- nearly nothing.

Meanwhile TUI, the package holiday giant whose main product has been basically illegal for months, is seeking e400 million just to get through.

It’s price for your money? Between 4.5% and 5%, a juicy yield at almost any time and certainly tasty when Bank of England interest rates are 0.1%.

The higher coupon is a function of jeopardy. TUI is admitting that lending it money is risky. The cash will be used to “improve its liquidity position” and repay “existing financial instruments”.

This is hardly TUI’s first refinancing during a pandemic which has seen it take a e3 billion loss and build debts of e4.2 billion.

The bankers will probably get the TUI offering away (the lads at Numis on the ASOS deal will be making money for jam) but they might have to actually earn their fees. (Don’t say: about time.)

Perhaps this is the societal role for bankers in a crisis that for once is not of their own making.

So far, the City can claim to have had a good war. Clients in need of cash to survive mostly got it; those that didn’t were doomed anyway.

Innovative, cheaper ways of getting money to businesses like TUI, whose difficulties are probably only temporary, are needed.

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