Friday, September 24, 2010

Container Line Boosts TUI As Shipping Revenues Rise

Hapag Lloyd Propose to Waive Government Loan Guarantee and Pay Back Owners
Shipping News Feature

GERMANY - As predicted the stock of the TUI AG travel and shipping group has risen after their 43% holding in container shipping line Hapag Lloyd started at last to pay dividends after extremely torrid times. It seems Hapag Lloyd are confident they will receive the backing they needed to continue in business without recourse to the Government funds which were underwriting the company.

Publicly TUI have insisted all the way through the recession that they wanted to offload the box carrier after selling a substantial chunk of the company last year. Now it is extremely likely that they will be looking for a higher price as Hapag, profitable again after the recent rise in container traffic coupled with prudent management, plus the effect of a proposed major loan conversion to equity, has increased the value and volume of the TUI holding.

With an uncertain future in the short term travel market and some of TUI’s holdings such as the Thompson Travel group under pressure to perform in increasingly difficult times, it is likely that they may adopt a wait and see policy for the next few months, unless someone comes forward with an exceptional bid.

TUI shares were trading at around €8.54 last night compared to a yearly low of just €4.69 as Hapag Lloyd management finalised the details of the $500 million high yield bond offer they intend to use to recapitalise the company. As part of this deal Hapag will pay around €280 million back to TUI from the €1 billion or so it borrowed last year. This will mean TUI collect an extra 6.5% of Hapag shares and the Government backed €1.2 billion loan guarantee can be cancelled.

Photo courtesy of TUI