TUI Rescue Swells to $5.8 Billion With Third Government Deal

(Bloomberg) — TUI AG, the world’s biggest tour operator, will see its rescue funding topped up to 4.8 billion euros ($5.8 billion) after securing a third tranche of aid from the German government and cash from private investors.

© Photographer: David Ryder/Getty Images North America
SEATTLE, WA – MAY 31: Boeing 737 MAX airplanes from TUI Airways sit parked in a parking lot at a Boeing facility adjacent to King County International Airport, known as Boeing Field, on May 31, 2019 in Seattle, Washington. Boeing 737 MAX airplanes have been grounded following two fatal crashes in which 346 passengers and crew were killed in October 2018 and March 2019. (Photo by David Ryder/Getty Images)

The latest package of 1.8 billion euros will include 1.3 billion euros from the state — amassed from federal fund WSF, state-run lender KfW and a state debt guarantee — together with 500 million euros from a shareholder capital increase, Hanover-based TUI said in a statement Wednesday.

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TUI appealed for additional aid after a new wave of virus lockdowns in Europe wiped out a hoped-for surge in late summer travel while stunting bookings for sunny winter getaways and ski breaks. The bailout, which adds to earlier rescue packages granted in April and August, was delayed by a debate over what conditions the state should attach, especially how much control the government should have over the company.

TUI closed 7.3% lower in London, where they have their main listing, following news of the impending share dilution. That extended the decline this year to 50%.

TUI was already Germany’s second-biggest coronavirus-bailout recipient, topped only by airline Deutsche Lufthansa AG. Companies spanning sportswear producer Adidas AG to forklift maker Kion Group AG have already paid back aid or are in the process of doing so.

Delayed Revenue

While the imminent start of Covid-19 vaccine distribution is positive for TUI, people are booking vacations far later than usual in response to ever-changing travel curbs, delaying revenue inflows. The company has also re-booked many customers from the 2020 summer, without taking extra cash.

“The measures agreed today are important as the company was profitable before the crisis and is now grappling with unprecedented difficulties,” a spokeswoman for Germany’s economy ministry said. The funds “will help Germany’s largest travel company bridge this difficult time.”

The deal includes 700 million euros in silent participations from the WSF, a loan of 200 million euros from KfW and a state guarantee of more than 400 million euros. Parts of the package can be converted into equity, meaning the government could end up holding 25% plus one share in TUI.

The state will also nominate two members to TUI’s supervisory board, and the deal comes with restrictions such as preventing the firm investing in other companies. The statement did not mention job cuts.

Russian billionaire Alexey Mordashov’s family, which owns just under 25% of TUI shares, said it will participate in the capital increase.

“The challenges TUI is facing at the moment are a direct consequence of the pandemic and the resulting travel restrictions,” a representative for the family said in a statement. “As a long-standing strategic investor, the Mordashov family has no doubt that TUI’s business model is intact and the medium and long-term prospects are extremely positive.”

(Updates with government comment in seventh paragraph)

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