Tui shares tumble as holiday group launches €1.8bn discount fundraiser to reduce Covid-19 debt and interest costs
- Tui issues shares at €5.55 per new share, a 40% discount on the ex-rights price
- It intends to use the net proceeds of €1.75 million to reduce interest costs and debt
- The increase in holiday bookings reported in the first quarter results continued
Tui has launched a major €1.8bn (£1.6bn) fundraiser to help pay off his debts, including money he owes the German state for aid it received during the pandemic.
The German-based holiday group, whose shares are listed in both Frankfurt and London, said it would issue shares at €5.55 per new share, representing a discount to the theoretical ex-rights price of about 40 percent.
Tui shares in London fell 6.2 per cent to £13.26 and fell 5.5 per cent to €15.12 in Frankfurt following today’s announcement.
Fundraising: Tui is trying to reduce debt and interest costs incurred during the pandemic
The company said it plans to use the net proceeds of around €1.75 billion to reduce interest costs and debt incurred when Covid stopped travel.
This includes repaying €420 million to the German government, €58.7 million in bonds, including accrued interest of approximately €750 million, and reducing the credit line from €2.1 billion to €1.1 billion.
The fundraiser is expected to reduce Tui’s €3.4 billion net debt to around €1 billion.
This would reduce net interest payments by about €80 million to €90 million, the company added.
It also said the rise in holiday bookings reported in its first-quarter results in February had continued.
Russ Mold, director of investment at AJ Bell, said that while the fundraising hurts stock price in the short term, it could be a path to recovery for the troubled travel company.
“TUI, weighed down by debt accumulated during the pandemic, is limited in its ability to invest in growth as the travel industry recovers,” he said.
A brief update on trading suggested continued momentum in bookings, but far too much of the company’s money is currently disappearing into interest payments.
The question is whether the money raised will be enough. Shareholders can swallow the dilution for once, but if TUI has to return soon with its begging bowl, it can be short shrift.’