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Another Great Deal For Germany…

26 March 2020 by jbchevrel

TUI AG (German tour operator) 5y CDS has tightened very aggressively today, shortly after noon, London time. They got a $2B aid package from the German government. TUI AG indeed has reached an agreement with Germany’s state-owned agency KfW development bank on the terms of the loans. That financing package is now with TUI’s lending banks, which are expected to sign off in the coming days. Short-end cash (oct 21s) was up +22 pts and the 5y CDS tightened about -21 pts in the aftermath of the news. We had closed it at 28% UF +500 running yesterday at the close, it is now ~7%. That alone contributed to ~1/4 of the fair value of the XOver s33 index move tighter, which was -30 in total. Another story that came before is that HandelsBlatt had previously reported that TUI AG could lose its business license in Germany by the end of April if it failed to meet a BaFin demand that it secure coverage of customer funds by April 28. Today TUI put out a statement saying that TUI’s operating license has not been endangered at any point. TUI AG is currently in talks with insurers and German market regulator BaFin about insurance cover for package tours. TUI said the discussions are “very constructive and positive” and that they will continue selling package holidays after April 28. In the same sector, Lufthansa 5y tightened -30 to close at 275bp and air-france KLM 5y tightened -160 to close at 500bp.