TUI launches €1.1bn rights issue as holiday bookings rise

TUI AG announced that it is raising €1.1bn in a rights issue to reduce debt amassed during the COVID-19 pandemic.

The Germany-based travel group also issued a trading update which revealed that pent-up demand, the lifting of restrictions and increased vaccination rates are having a positive impact on travel.

In a statement, TUI said it is issuing just over 523.5mln new shares at €2.15 each, which represents a 35.1% discount to the theoretical ex-rights price (TERP).

Shareholders will be entitled to 10 new shares for every 21 shares already held and Unifirm Ltd, which is controlled by the Mordashov family and is TUI’s largest shareholder with a 32% stake, has agreed to subscribe to all its rights.

The remainder of the capital increase is secured through an underwriting by a banking syndicate, TUI said.

The capital raising will increase TUI’s cash and available facilities to €4.5bn.

The group intends to use the proceeds from the capital increase to reduce current drawings from two loans. The KfW facility, under which as at 4 October 2021 the company had drawn €375mln, will be reduced to zero, while a cash facility, under which TUI has drawn around €1.5bn, will be reduced to €762mln.

Friedrich Joussen, TUI’s chief executive officer, said: “The offering will enable us to take a significant step forward, increasing our ability to take advantage of the business opportunities resulting from the easing of COVID-19 restrictions. It will provide us with a capital structure more appropriate for more normal operating conditions.”

In its trading update issued ahead of results for the year to end-September, TUI said bookings had been boosted by pent-up demand and growing confidence among holiday makers that departure would take place.

Bookings for summer 2021 totalled 5.2mln, an increase of 1.1mln since its third-quarter update, with bookings in Germany and the Netherlands in recent weeks well head of summer 2019.

Over 2.6mln customers took a TUI holiday during July and August, up from 1.3mln in the same months last year.

The company said it operated a capacity of 42% for July and 48% for August. Pandemic travel restrictions led to subdued UK bookings, and the group now expects capacity for the peak summer period from July to October to be between 50%-60%.

Peak summer period bookings are currently 49% of 2019 levels with the average selling price (ASP) up 2%, it noted.

Total winter bookings are now at 54% of 2018/19 levels and ASP is 14% higher. UK bookings for winter 21/22 bookings are “trending strongly” since the government’s recent easing of a number of travel restrictions, TUI noted.

With the lifting of travel restrictions and rising vaccination rates, the company expects a wider return to international travel this winter and plans to operate between 60%-80% of a normalised programme.

Bookings for summer 2022 currently total 1.6m, an increase of 326,000 since the third-quarter update. Overall summer 2022 bookings are up 54% and ASP is up 15% versus summer 2019.

“With the strong indications of pent-up demand, we believe summer 2022 volumes will likely recover close to normalised levels of summer 2019.” TUI said.