TUI seeks to raise £500m for warchest

TUI Travel, Europe’s biggest travel firm, says it plans to raise £500m in new financing to fund acquisitions.

The company behind Thomson and First Choice has taken a hit of £26m as a result of the subsequent disruption caused by the volcanic ash.

But the group remains bullish and said yesterday the fund-raising would ensure it was well placed to exploit a strong pipeline of opportunities.

TUI Travel, which Germany’s TUI AG has a controlling stake of 54.9 per cent in, is looking to expand in emerging markets such as Brazil, China, India and Russia, and buy high margin businesses in specialist sectors such as the UK student segment and global cruise destination services.

“They’ve raised significant firepower,” said KBC Peel Hunt analyst Nick Batram. “They had been questioned about whether they had enough headroom to make reasonable acquisitions and this addresses that.”

The group said it was taking advantage of favourable conditions in the convertible bond market. Rival Thomas Cook said on Friday it had raised over $1bn (£651m) through new sterling and euro bond issues.

The grounding of planes over the past five days means TUI currently has more than 100,000 holidaymakers stranded abroad, including 36,000 from Britain.

The group said the disruption had not put people off booking holidays for the summer season. TUI Travel added that booking volumes in the UK had been well ahead of the same period the previous year.

TUI Travel is offering £350m of senior convertible unsecured bonds due to mature in 2017. It has also agreed additional credit facilities with its banks worth £150m.

The consensus forecast for full-year earnings before interest and tax currently stands at £453m analysts said.