1 February 2023

Interview on planned capital measures

with TUI Group CFO Mathias Kiep

In December, TUI reached an agreement with the Economic Stabilisation Fund (WSF) to repay Corona aid – despite market conditions remaining challenging. Why was the timing right for this decision?

We want to return the state aid we received during the pandemic as quickly as possible. We have always communicated this very clearly. Together with the WSF, we have agreed on a structured process for the return of the state aid. 2023 will be a year of transformation in which we will implement this consistently in order to replace the support from the federal government and prepare TUI for profitable growth. It remains important for us to reduce our net debt and interest costs and to strengthen TUI's balance sheet in order to improve our financial and entrepreneurial scope. In spring 2022, we started to gradually reduce state aid. We then had a very good summer business and a clearly positive operating result for the full year. At the same time, we continue to consistently implement our own transformation: TUI is operationally and financially stable. With our clear strategy and our robust business model, we want to quickly return to normality and profitable growth.

What does the agreement provide for in concrete terms?

The agreement sets out the conditions for repayment and forms the basis for the corresponding resolutions by our shareholders at TUI's Annual General Meeting on 14 February 2023. Specifically, it still concerns Silent Participation I of 420 million euros and the remaining part of a warrant bond subscribed by WSF of 59 million euros as well as accrued interest. Both instruments could be converted by the state into shares in TUI. However, in order to enable TUI to repay the measures, the state waives the right to convert the two instruments into shares in TUI at 1.00 euro per share until the end of 2023. In total, we pay between 730m and 957m euros to the state for the full exit of the WSF, depending on the share price development. Independently of the agreement with WSF, we also want to substantially reduce the existing credit lines at KfW.

How is the repayment of aid to be financed?

A capital increase with subscription rights is planned, which we announced in December. The preconditions for this are to be created at the Annual General Meeting on 14 February.

What are the preconditions?

Already at the last Annual General Meeting in February 2022, two authorised capitals were approved, which are to be used for the capital increase. For the capital increase to be successful, however, the share capital must first be reduced. TUI shareholders will vote on this at the Annual General Meeting in February.

Can you please explain this in more detail?

As TUI, we have undertaken to propose a reduction of the share capital to the Annual General Meeting. This is part of the agreement with WSF and creates a better starting position for TUI to refinance itself. The background to this is that in a capital increase new shares are always issued at a discount to create an incentive to acquire them. According to stock corporation law, the issue price of the new shares may not be less than 1.00 euro. In the planned capital reduction, we want to combine the shares at a ratio of ten to one in order to maintain the necessary flexibility with regard to the share price. This reduces the number of shares by a factor of ten. However, the price of the share on the stock exchange will then increase accordingly, since the constant market capitalisation of the Group will be distributed over fewer shares.

What are the concrete effects – especially for the shareholders?

If the Annual General Meeting votes in favour of the reduction, the number of issued shares will be reduced to one tenth, i.e. it will fall from currently about 1.785 billion shares to then about 179 million shares. As a result of the consolidation of the shares, one new share embodies a tenfold stake in TUI compared with the old share, so that the stock market price for one new share increases mathematically tenfold. The value of our shareholders' stake remains unchanged. For example, a share deposit account with currently 100 TUI shares and a market value of 200 euros would still contain 10 (new) TUI shares after the reverse stock split, with the same market value of 200 euros. If the number of shares in the custody account does not amount to an amount divisible by 10, the shareholder will, depending on the custodian bank, be able to realise or acquire additional partial share rights.

What do I have to do as a shareholder to participate in the capital reduction and the subsequent capital increase?

The first important step is to obtain the necessary approval from the AGM for TUI to reduce the share capital, in which every shareholder can participate by attending the AGM and approving the proposed resolutions. Once this has been done, the shares are pooled via the company's own custodian bank. Subsequently, further steps are taken for the capital increase, which is to be carried out when the market environment is favourable. Those who own shares in TUI receive a notification from their bank about the allocated subscription rights. This way, I find out how many new shares I am entitled to buy at a fixed subscription price per share.

And if I don't want to participate?

That is also possible. Then the subscription rights are sold and the buyer thereby acquires the right to subscribe to new shares. In this case, I receive the equivalent value of the subscription rights credited to my account. However, one should bear one important point in mind: if one does not participate in the capital increase, the percentage share of one's own share package in the total company decreases. This is because: by issuing additional shares, there are subsequently more shares of the Group in circulation and the company's profit is distributed over more shares, thus reducing my share and also the value of my deposit – it is “diluted”.

Where can I find more information on this topic?

The most important questions and answers on the subject have been compiled on the TUI Group website in the Investor Relations section.

Thank you very much, Mathias Kiep.

You're very welcome.