Tui - lucky bondholders

All,

Tui bondholders are counting their lucky stars as the Company announced another wave of financial support, this time a €500m shareholder rights issue combined with further government support. The proceeds of the rights issue are to be used for the repayment of the €300m October 2021 bond issuance.

We always felt uncomfortable taking a position in TUI bonds given the relative upside/downside on any long trade with the recent trading in the 90’s. We felt comfortable that any further fundraising by the Company would likely involve the repayment of the October 2021, given their pari-passu nature vis a vis the RCF, including the state-backed portion. Given the news today we acknowledge that we have missed this trade but from a risk-reward perspective, we remain comfortable with our decision.

The Company has achieved an additional €1.5bn in liquidity (€1.8bn less the €300m repayment of the bond) from this series of transactions.

Equity Raise: The equity raise of €535m (€500m net of fees), at €1.07 (80% discount to current trading price) is underwritten by the largest shareholder (Mordashov family) and four investment banks.

WSF Hybrid: Additionally, the German Rescue Fund is participating in further hybrid bonds up to €700m, €420m of which are convertible into 25% of post rights issue equity at €1, plus a further €280m hybrid facility which has no conversion rights and has loss participation.

KfW RCF: KfW is providing a further €200m RCF, but this tranche is secured (unlike the previous tranches).

State Guarantees: The State will provide, via fronting banks, guarantees up to €400m in order to free up cash held as collateral.

The reason for the state investment via convertibles and state guarantees is to circumvent EU rules on state aids. Where there is a will, there is a way!

Post the release of TUI’s FY20 results on 10th December, an EGM will be held in early January to seek approval for the package with settlement and bond repayment likely in early February 2021. Bondholders should count their lucky stars.

Happy to discuss,

Tomás

_______________________

E: tmannion@sarria.co.uk
T: +44 20 3744 7009

M:+44 7786 705 806
www.sarria.co.uk