German travel group TUI AG's stock rose by over 13 percent on Thursday after it assured investors the loans given to its former shipping unit, Hapag-Lloyd, that hurt second-quarter results, would be repaid. TUI Chief Executive Rainer Feuerhake told analysts on a conference call that cash payments of 350 million euros ($494.4 million) next year were secured, adding TUI would be able to fulfil all its financial obligations in 2010.
"Feuerhake made it clear that repayment of debt is secured until 2011. Many are breathing a sigh of relief at that," said UniCredit analyst Christian Obst. TUI, owner of Europe's largest holiday company, TUI Travel, last year decided to sell Hapag-Lloyd to focus on tourism, ending a 10-year foray into container shipping. But it ended up keeping 43 percent of the shipper, more than planned, and has had to support it with credit lines.
Feuerhake said Hapag-Lloyd plans to file on Thursday for 1.2 billion euros ($1.7 billion) of state guarantees to back bank loans. The German government would probably grant the guarantee in September, a month before Hapag-Lloyd runs out of cash. Shares of TUI were up 13.8 percent at 5.36 euros by 0822 GMT, while the German midcap index was up 1.7 percent.
TUI's second-quarter net loss widened to 536.9 million euros from a loss of 56.4 million euros in the same period last year, far worse than the average estimate in a Reuters poll of analysts for a loss of 151 million euros. The wider loss was largely attributable to the 371 million euros in charges for the loans to Hapag-Lloyd. Sales fell 11.9 percent to 4.18 billion euros, which was broadly in line with estimates. TUI said it still expects a positive group result in 2009, backed by positive operating earnings at its tourism operations.
TUI Travel reported third-quarter earnings ahead of market expectations on Wednesday, which were overshadowed by a sharp decline in winter bookings. "We expect demand in the tourism sector to be under pressure in the next two years with the market-leading companies able to reduce capacity to limit margin pressure," said UniCredit analyst Christian Obst.
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