Tour operator TUI plans US$1.3b stock sale to cut debt

[LONDON] TUI will raise US$1.3 billion by selling new stock, making it the latest travel company to tap investors for cash to reduce a giant pandemic debt pile.

The share sale, at a discount price of 2.15 euros (S$3.38) each in a rights offering, will allow the world's biggest tour operator to reduce its draw on a state-backed rescue loan to zero, TUI said Wednesday in a statement.

Airlines have selling stock to firm up balance sheets as easing border restrictions begin to revive bookings. Deutsche Lufthansa said it would raise 2.14 billion euros in a rights issue to help pay 9 billion-euro government bailout package, while EasyJet announced a £1.2 billion (S$2.21billion) capital raise last month.

Bloomberg reported in June that the company was exploring ways to raise about 1 billion euros in fresh capital to help it pay back state bailouts.

TUI has raised billions of euros from three bailouts since the pandemic hammered its core business, taking mainly British and German tourists to warm-weather destinations. The company, which operates airlines, hotels and cruise ships, has relied on the German government and private investors to pitch in on prior financing.

With the TUI offering, European airlines will have announced US$8.91 billion in equity fundraising this year, out of a global total of US$21.8 billion for the industry as a whole, based on data compiled by Bloomberg.

Air France-KLM, Jet2 Plc and Wizz Air Holdings are among other carriers in the region that sold shares earlier in 2021.

Airlines have had a total of US$243 billion in government support, according to the International Air Transport association, approaching half of which needs to be paid back.

A return to positive cash flow this past summer gives TUI's management some breathing as it plots an exit from the crisis, provided the recovery doesn't falter yet again.

The company also said Wednesday it expects a wider return to international travel this winter season with capacity significantly better than last year. Still, it expects to operate only at 60 per cent to 80 per cent of normal levels.

The fully underwritten rights offering, at a 35 per cent discount, will cut TUI's debt to 6.5 billion euros from 8.7 billion euros, the company said. Top shareholder Unifirm will exercise rights for its entire 32 per cent stake. The offering will run from Oct 8 to Nov 2.

BLOOMBERG