Yahoo Finance TUI shares sink as travel agent forced to raise €350m
TUI (TUI.L) shares slummed 7% on Friday after the UK's biggest tour operator announced it would need to raise €350m ($416m, £304m) via a convertible bond to offset the impact of the coronavirus crisis.
The bonds are due in 2028 and the offering could be increased to €400m, the company said.
They will be issued with a coupon between 4.50% and 5.00% per year and they will be convertible into new or existing TUI shares.
Initially, the conversion price will be set at a conversion premium between 25% and 30% above the reference share price. This is the volume weighted average price of its Frankfurt-listed shares between launch and pricing of the bond offering on 9 April.
Proceeds from the offering will be used "to further improve its liquidity position as the COVID-19 crisis continues and subsequently for the repayment of existing financing instruments."
Shareholders in the company voted in January to allow the German government to take a stake of up to 25% in the company.
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TUI has been bailed out three times by the German state since the onset of the COVID pandemic. It has received over €5bn in financial aid, so far.
A sizeable chunk of its debt, including some state loans, will need to be repaid by July 2022.
In March, TUI said that it had "sufficient liquidity" until the summer and that booking trends were encouraging. The company, which faces an uncertain summer ahead, had liquidity of €1.6bn at the end of March — a monthly cash burn between €250m and €300m.
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The company's net debt ballooned last year, currently standing over €7bn, putting the firm on a high net debt to earnings ratio of six times. Generally, three times is considered sustainable.
TUI, which sells holidays to 180 countries, has also suffered heavy losses during the crisis, reporting a €3.2bn pre-tax loss in the year to the end of September 2020.
It comes as the travel sector slammed new proposals published by the government's Global Travel TaskForce on Friday.
The announcement includes a traffic light system, which categorises countries based on risk as well as COVID tests, even for people arriving from low-risk green destinations.
Industry giants and airlines have called it another "hammer blow" for the sector and budget airline Jet2 (JET2.L) has announced it will suspend flights until 23 June due to the government's "lack of clarity."
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