Tui has insisted there will be ‘no forced sales’ of assets after UK media reports suggested the group is “under pressure” to dispose of parts of its business.
Europe’s biggest travel group, Tui confirmed a deal with Germany’s state-owned development bank KfW to raise €1.2 billion in credit last week as it reported a loss of €2.3 billion for the nine months to June.
The deal was in addition to €1.8 billion raised in May and chief executive Fritz Joussen made clear the group was looking at options to raise additional funds.
However, he insisted Tui retains sufficient liquidity. Joussen said last week: “There is still volatility so we are happy we agreed new financial headroom with the Federal government of Germany.
“It remains to be seen if we need the money. Having it in place is important.”
He suggested the group’s liquidity position was better than it appeared earlier in the crisis, insisting that in May: “We thought we were in a much worse position.”
The funds raised in May “might still be enough”, he said, “but the volatility and uncertainty are very big” and raising additional liquidity remains important “even if you don’t need it”.
Joussen added: “We suffered three months without revenues” and restarting operations meant “costs increase because aircraft fly and people return from furlough. So we need to be certain our cash will cover it.”
The Financial Times reported last week that Tui was “weighing up a rights issue or sales of parts of its business”. The Times reported Tui was considering the “disposal of parts of the business . . . under pressure to bring down the ballooning debt it has taken on”, and the Telegraph reported: “Tui is eying a stock market fundraising and the sale of subsidiaries.”
However, a Tui source said: “We only said a rights issue could be one of many options. There will be no forced sales. There are other options such as taking assets off balance sheet like we did with Hapag-Lloyd Cruises. There could be a similar strategy for Marella.”
Tui announced the completion of the sale of subsidiary Hapag-Lloyd Cruises to Tui Cruises, a joint venture between Tui and Royal Caribbean Group, on July 8.
Hapag-Lloyd Cruises was valued at €1.2 billion so the sale, announced in February before the Covid pandemic, released about half that valuation in funds by switching ownership to the joint venture.
Joussen said last week that Tui UK cruise brand Marella Cruises “might be” subject to a similar deal.
He insisted: “There will be no forced disposals. What we did with Hapag-Lloyd, we did for strategic reasons. The synergies are so big, it is so clear strategically.”
The source told Travel Weekly: “We still own several hotels, but to control the brand, sales and operations we don’t need to be in real estate, so could sell hotel buildings. We could also take aircraft off balance sheet by selling and leasing [them] back.”
Tui completed the sale and leaseback of five new Boeing 737 MAX aircraft on August 3, raising a further €193 million.
The aircraft are due for delivery in 2021 and Tui made clear its intention to undertake “further sale and leaseback financing” on future deliveries.
The additional credit took Tui’s total cash and available credit to €2.4 billion “to cover Tui’s seasonal working capital through winter 2020-21 and thereafter, should there be further periods of travel restrictions and disruptions related to Covid-19”.