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Tui (ETR:TUI1n) launched a deeply discounted rights issue to assist it pay back government aid from the pandemic era, and as a result, shares of the German-based travel operator fell 10% at market open on Friday.
The company announced that it will raise €1.8 billion in new equity at €5.55 per share, or around 40% less than Thursday’s closing price.
To pay off all of its debts owed to the WSF, a German government agency established in early 2020 to provide liquidity support to businesses harmed by the pandemic, Tui will spend €750 million. It will also pay back €440 million drawn from a €750 million credit line with the development bank Kreditanstalt für Wiederaufbau. As a result, its facility with KfW will be cut in size to little under €1.1 billion.
The remaining proceeds of €568M will be used to settle the company’s ongoing debts from its other credit facilities.
TUI said in a statement that its capital increase and the huge return of government funds announced today “provide for a considerable improvement in TUI’s credit metrics and lower continuing interest expenses, allowing the Company to focus on expansion and continued market recovery.”
The company only confirmed the “encouraging booking momentum” it announced last month and didn’t offer much else about how business is still going.
The Russian steel tycoon Alexei Mordashov, subject to Western sanctions and excluded from the deal, will be severely diluted by the rights issue, which would offer existing owners eight new shares for every three they already hold. From its current level of just over 30% to just over 10%, Mordashov’s stake will decrease.
By 04:45 ET (08:45 GMT), Tui stock had recovered slightly to trade down only 6.3%.
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