TUI Group Chooses Banks for Rights Offering to Repay Bailout

TUI AG has selected banks to arrange a rights offering to help repay part of a German government bailout package, according to sources familiar with the matter.

The travel company has chosen Bank of America Corp., Barclays Plc, Commerzbank AG and Deutsche Bank AG to work on the capital increase, according to sources familiar with the matter. The sources asked not to be identified because the information is confidential.

Analysts have said that TUI may seek more than €1.5 billion from the offering, though precise terms haven’t been decided. TUI may add more banks to the lineup for the deal, which could launch as soon as the next few months, the people said. The planned rights issue will only come after TUI’s annual general meeting in February.

TUI, based in Hanover, received €4.2 billion in state assistance in 2020 as the Covid-19 crisis brought the global travel industry to its knees. Late last year, it agreed on a plan to repay a chunk of that amount through capital increases.

In December, the company said that it would use the money it raised to pay back a €420 million silent participation and a hybrid debt-equity instrument, and reduce a credit facility with Germany’s state investment bank.

TUI's biggest investor, Unifirm Ltd., is controlled by the family of Russian billionaire Alexey Mordashov, who has been sanctioned by the European Union. TUI may have to adopt a different structure for its rights issue that allows for new or existing investors to take up Unifirm's portion of the offering, according to people familiar with the matter.

Talks are still underway and the terms of the deal could still be revised, according to the sources. Representatives for TUI, Bank of America, Barclays and Deutsche Bank all declined to comment. A spokesperson for Commerzbank did not immediately respond to requests for comment via email and phone.

TUI's prospects have been improving since the lifting of pandemic travel restrictions, in line with other companies in the industry. TUI is looking to increase its market share as a cost of living crisis puts pressure on consumer spending. This is driving people toward lower-cost package holidays that include flights, accommodation, bus transfers and food.