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Commission approves €1.25 billion German measure to recapitalise TUI

Christian Fernsby |
The European Commission has approved German plans to contribute up to €1.25 billion to the recapitalisation of TUI AG (TUI), the parent company of the TUI Group, as part of a wider support package.

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Topics: GERMAN    TUI   

The measure was approved under the State aid Temporary Framework.

TUI is a German major leisure tourism group operating in several Member States. Through its various subsidiaries, TUI operates hotels, cruise ships, airlines, aircrafts, travel agencies, tour operators and online portals.

TUI suffered substantial losses due to the coronavirus outbreak and the travel restrictions that Germany and other countries had to impose to limit the spread of the virus.

Despite the liquidity support measures already granted to the company by Germany in March and August 2020 the significant drop in travel demand and the measures implemented to limit the spread of the virus continue to deteriorate the financial situation of the group. As a result, TUI is currently facing a risk of default and insolvency.

The measure will not exceed the minimum needed to ensure the viability of TUI and will not go beyond restoring its capital position before the coronavirus outbreak. When assessing the proportionality of the recapitalisation measure, the Commission took also into account the other State aid measures in favour of the company in the context of the coronavirus outbreak.

Conditions on the State's entry, remuneration and incentives to exit from the capital of the company: The recapitalisation aid will prevent an insolvency of TUI, which would have serious consequences on German employment and the economy.

Germany will receive an appropriate remuneration for the investment and there are additional mechanisms to incentivise TUI to redeem the State's silent participation and the warrant bond obtained as a result of the recapitalisation. Germany submitted a business plan until fiscal year 2025 prepared by TUI to demonstrate the impact of the recapitalisation instruments.

It also committed to work out a credible exit strategy within 12 months after the aid is granted, unless the State's intervention is reduced below the level of 25% of equity by then. If six years after receiving the recapitalisation aid the State's intervention is not reduced below 15% of TUI's overall equity, a restructuring plan for TUI will be notified to the Commission.

Conditions regarding governance: Until the State has exited in full, TUI and its subsidiaries are subject to bans on dividends and share buybacks, other than in relation to the State.

Moreover, until at least 75% of the recapitalisation is redeemed, a strict limitation of the remuneration of TUI's management, including a ban on bonus payments, is applied. These conditions aim at incentivising an exit of the State as soon as the economic situation allows.

Prohibition of cross-subsidisation and acquisition ban: To ensure that TUI does not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the Single Market, it cannot use the aid to support economic activities of integrated companies that were in economic difficulties already on 31 December 2019.

Moreover, until at least 75% of the recapitalisation is redeemed, TUI is in principle prevented from acquiring a stake of more than 10% in competitors or other operators in the same line of business.

Public transparency and reporting: TUI will have to publish information on the use of the aid received, including on how the use of the aid received supports the company's activities in line with EU and national obligations linked to the green and digital transformations.

The Commission concluded that the recapitalisation measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member States: the measure aims at restoring the financial position and liquidity of TUI in the exceptional situation caused by the coronavirus pandemic, while maintaining the necessary safeguards to limit competition distortions. TUI does not hold a significant market power on the relevant markets on which it operates.


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