TUI AG reported on Wednesday that they have reached an agreement with the German Federal Government for an additional stabilization program valued at €1.2 billion. The existing KfW tranche will increase by €1.05 billion and a €150 million convertible bond will be issued.
On Wednesday (August 12, 2020) Hanover, Germany-based integrated tour operator TUI AG announced that they have reached a deal with the German Federal Government on an additional €1.2 billion stabilization package. The German state-owned development bank (KfW) will increase the company’s existing stabilization tranche by €1.05 billion, dependent on the company meeting certain conditions and requirements. First, TUI AG must issue a Convertible Bond to the Economic Stabilization Fund (WSF) for €150 million and secondly, bondholders must agree to a waiver on Senior Notes due in October 2021. Both conditions and other formal requirements must be achieved by September 30, 2020.
TUI believes that the additional €1.2 billion will provide enough liquidity to cover the company’s seasonal swing through Winter 2020/21 and beyond, providing sufficient runway in the event of further COVID-19 travel restrictions and disruptions. With the additional funding, TUI will have €2.4 billion in available cash credit facilities. Like the fist KfW tranche of €1.8 billion received last April, the new funding will be structured as an increase to TUI’s Revolving Credit Facility (RCF). The €150 million Convertible Bond (subscribed by the WSF) will have an additional six year term at an annual interest rate of 9.5%. TUI will have a redemption right as soon as the €1.05 billion KfW tranche is redeemed. If fully converted, the Bond would represent an ownership stake in TUI AG of up to 9%. The conversion price per share will be fixed at 60% of the company’s average stock price before issuance, but not less than €2.56. The WSF will maintain the right to call for the conversion of the Bond into TUI AG shares at any time.
The additional KfW tranche remains subject to the same conditions of the first tranche including a suspension of dividend payments, restraint on company share buybacks and a waiver of future potential indebtedness under TUI’s Senior Noted due in October 2021. The WSF stabilization measure includes further restrictions such as investments in other companies and board member compensation for as long as the WSF remains invested. With the easing of travel restrictions, TUI’s working capital position has started to benefit from the partial restart of their Summer 2020 program as well as commitments for future holidays.
Source: TUI AG