By Scott Kanowsky
Investing.com -- Tui AG NA (ETR:TUIGn) shares slumped on Wednesday after the tour operator announced that it will pursue a rights issue to pay at least €730 million (€1 = $1.0651) back to the German government for state aid given to the firm during the pandemic.
In a statement released on Tuesday, Tui said it would repay Berlin for its silent participation provided via the government's Economic Stabilization Fund (WSF), along with the repurchase of a remaining warrant bond, until the end of 2023. The total repayment price amounts to €730.1M plus interest.
Tui would also move to draw down its credit lines with state development bank KfW under the terms of the deal.
As part of the agreement, the company would receive option rights to shares currently held by the WSF as well.
To finance this repayment plan, Tui said it will pursue a rights issue that analysts at Morgan Stanley estimate could be worth between €1.5B - €1.9B - or as much as 60% of Tui's market value.
The analysts warned in a note to clients that this is likely to lead to an "overhang" on Tui shares.
However, Chief Executive Sebastian Ebel argued in a statement that the travel group has "surmounted the existential crisis."
"Of course, we still have homework to do as a consequence of the pandemic, further cutting our debt, refinancing, strengthening the balance sheet," he added.
Separately on Wednesday, Tui posted revenue in the year ended on September 30 of €16.5B, close to pre-pandemic levels. The top-line figure came in at €18.9B in 2019. Underlying earnings before interest and tax also recovered from a 2021 loss to rise to €409M.