Tui has announced a deal with the German state bank for an additional €1.2 billion in funding.
German-based Tui reported the deal with Germany’s state-owned development bank KfW on Wednesday ahead of announcing the group’s third-quarter results.
The €1.2 billion ‘stabilisation package’ comprises €1.05 billion in credit extended by KfW and a €150 million convertible bond issued through Germany’s Economic Stabilisation Fund (WSF).
The conditions on the deal are expected to be signed off by September 30.
Tui has already drawn €1.8 billion in credit through the KfW in April. This extended the company’s existing revolving credit facility provided by a consortium of banks.
The additional funds take the cash and credit facilities available to Tui to €2.4 billion.
In a statement, Tui said: “The €1.2 billion stabilisation package strengthens Tui’s position and would provide sufficient liquidity in this volatile market environment to cover Tui’s seasonal swing through winter 2020-21 and thereafter and in the case of further long-term travel restrictions and disruptions related to Covid-19.”
A convertible bond is a security which can be converted to shares in a company at a fixed rate – in this case up to 9%. The group will pay 9.5% interest on the bond, with an initial term of six years.
A condition of the state aid is that Tui pay no dividends to shareholders. The agreement also includes restrictions on investing in other companies and on the remuneration of board members.
Tui noted the easing of travel restrictions in Europe “enabled Tui to benefit from a partial restart to its summer 2020 programme with an immediate positive effect on working capital.”
The group said: “Holidays remain a high priority to our customers and we continue to work through different demand scenarios as we move through the current and upcoming seasons.”
More: Tui Group secures €1.8bn government loan [March 20]