Europe’s biggest travel group failed to dispel concerns over its financial position as it announced the launch of a €400 million convertible bond issue.
Tui Group said it intended to use the proceeds “to further improve its liquidity position as the Covid-19 crisis continues” and thereafter to repay existing borrowings.
The unsecured bonds, carrying a coupon of between 4.5 per cent and 5 per cent, will amount to €400 million and mature in 2028.
The markets remained unconvinced, sending the shares plunging by 25.25p, or 6.4 per cent, to 372p amid fears that the bond issue would have only a limited impact on Tui’s finances.
Becky Lane, an analyst at Jefferies, estimated that the extra €400 million would add only just over a month’s liquidity to cater for cash burn, adding: “This is a very short-term and insufficient liquidity fix.”
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She estimated that when added to the €1.6 billion of liquidity at the end of March, the new convertible bonds would give the Anglo-German company six months of headroom on cash burn.
Danni Hewson, a financial analyst at AJ Bell, said that although the cash would “keep it afloat while it plays the waiting game for when travel can restart,” it would not last long. “Plans by Tui to secure up to €400 million through issuing bonds is like giving someone an ice cream on a hot day,” he said.
The bond issue, via an accelerated bookbuilding process to institutional investors, is the latest in a series of complex refinancings that have left Tui weighed down with net debt of about €7 billion and gross debt of more than €10 billion before potential structural changes. A number of the moves have been backed by the German government.
Tui Group was created in 2014 by the merger of Tui Travel, of Britain, and Tui AG, its German majority shareholder. It employs 70,000 people in more than 100 countries and has about 28 million customers. It has more than 400 hotels, 18 cruise ships, 150 aircraft and 1,600 travel agencies.
Tui’s fate ultimately depends on the resumption of international travel and yesterday’s comments from the UK government did little to ease concerns. It said it would not be able to confirm the mooted reopening on May 17 and which countries holidaymakers can visit until early next month.
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Under the traffic light system, even “green” countries will require travellers to undergo a polymerase chain reaction (PCR) test, which the travel industry argues will make holidays prohibitively expensive.
Suggestions that the government could prioritise travel to countries where 50 per cent of adults have had at least one vaccination dose have also been criticised by operators who claim it would initially limit travel to a very small number of destinations.
The government has said it will review the plan on June 28 when the testing and quarantine rules could be relaxed for “amber” countries, possibly opening up the most popular destinations such as Spain, Italy and Greece and kickstarting the peak July-to-August holiday season.
Jamie Rollo, an analyst at Morgan Stanley, said: “Overall it is not the clarity the industry was hoping for.”
