Houlihan Lokey Advises Ad Hoc of TUI Noteholders

We are pleased to announce the successful amendment of TUI AG’s (TUI) €300 million senior unsecured notes (the Notes).

TUI is Germany’s largest international tourism conglomerate offering holiday experiences via its airline, hotels, cruise ships, and destination experiences. More than 400 hotels, 19 cruise ships, and approximately 150 aircraft are operated under TUI’s brands as of October 19.

Global tourism was one of the first and most severely impacted industries following the outbreak of the COVID-19 pandemic. TUI’s mix of airlines, cruise ships, and international holiday resorts was vulnerable to an almost complete shutdown of passenger air travel and extensive travel bans in its strongest markets, Germany and the United Kingdom. In Q2 ’20, TUI’s revenues decreased by 98% YoY. To cushion the unprecedented effects of the pandemic, TUI was one of the first companies that applied for and was granted state aid consisting of a €1.80 billion financing by German state bank KfW.

Despite all operational actions taken, the company faced further liquidity shortages and tapped the government funding program for additional support consisting of another KfW loan of €1.05 billion, as well as a €150 million convertible bond, underwritten by Germany’s economic stabilization fund WSF.

This second government support package required the holders of TUI’s Notes to waive an incurrence covenant. On behalf of an ad hoc committee of noteholders, Houlihan Lokey negotiated improved economics in return for a waiver without participation from the shareholders. The final counterproposal, which was eventually supported by TUI and agreed upon by the noteholders, included an interest rate increase from 2.125% to 9.500%, a step up of the waiver fee from 1.000% to 3.000%, and a quarterly cash penalty fee of 2.000% PQ starting in April 2021. The company furthermore committed to using any proceeds from relevant financings or any equity raise in excess of €150 million for a pro-rata paydown of the Notes. After announcement of the transaction, the Notes traded up, almost to par.

Houlihan Lokey played a critical role in developing a solution and negotiating between all involved parties. The agreed structure incentivizes the company to refinance the Notes and reimburses the noteholders for an increased risk profile. The transaction included the complexity of multiple simultaneous financing and refinancing work streams on the company side as well as multilayered political considerations.

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