TEXT-S&P revises German tour operator TUI outlook to positive

Fri Nov 23, 2012 6:41am EST

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(The following statement was released by the rating agency)

Nov 23 -

Overview

-- Germany-based tour operator TUI AG has improved its financial performance beyond our previous expectations.

-- We anticipate the company will reach adjusted debt leverage of below 6x for fiscal 2012 and further gradually reduce debt leverage over the next 12 months.

-- We are revising our outlook on TUI to positive from stable and affirming our 'B-' rating.

-- The positive outlook reflects our expectation that TUI will improve its financial metrics for fiscal year 2012 and beyond.

Rating Action

On Nov. 23, 2012, Standard & Poor's Ratings Services revised its outlook on Germany-based tour operator TUI AG to positive from stable. At the same time, we affirmed our 'B-' long-term corporate credit rating on the company. We also affirmed our ratings on all of TUI's rated debt issues.

Rationale

Our outlook revision reflects the expected improvement in TUI's financial credit ratios due to its good operating performance and focus on debt reduction, which we expect will continue in the future. We also believe the company should be able to achieve adjusted debt to EBITDA of less than 6x for the fiscal year ended Sept. 30, 2012, and further reduce adjusted debt leverage during fiscal 2013.

Following an expected strong fourth quarter and successful cost cutting at TUI Travel, together with significantly lower debt leverage at the holding company after the partial disposal of Hapag-Lloyd in the first half of 2012, we believe TUI should be able to achieve adjusted debt to EBITDA of just under 6x and adjusted EBITDA interest cover of about 2.5x. We consider these ratios commensurate with a 'B' rating.

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