Recapitalising Amadeus amid extreme market uncertainty
Few sectors have been as badly affected by COVID-19 as travel. Amadeus, which is one of the world’s leading providers of travel technology software for airlines, hotels, tour operators, insurers, car rental agencies and a host of other industry players, has taken a significant hit as a result of trip cancellations and restrictions on international flights.
In response, the company launched a contingency plan to shore up its liquidity. The measures saw Amadeus:
- tap a revolving credit line and agree a €1bn bridge-to-bond facility to pay down existing debt;
- cancel a proposed dividend payment and share buyback;
- introduce efficiency savings to reduce costs; and
- raise a further €1.5bn via the issuance of €750m in new equity and €750m in senior convertible bonds.
Freshfields advised Amadeus on all legal aspects of the plan, which was executed at speed against a backdrop of extreme economic uncertainty and unprecedented disruption to normal ways of working. Some of the key elements of our work are outlined below.
- The equity was raised via an accelerated bookbuild and required a clearly articulated rationale to attract investors. Our advice enabled the Amadeus board to proceed with confidence despite the heightened risks associated with raising capital in volatile markets.
- In order to ensure the right balance between debt and equity-linked instruments, the issuance of shares and bonds was carried out simultaneously.
- Everything had to be co-ordinated with the regulatory authorities at a time when Spain was on lockdown and most staff were working from home.
- Amadeus was about to publish its financial results for Q1 2020, meaning it had a small window in which to raise the financings before it entered the mandatory blackout period. All the regulatory requirements (including the appointment of an independent expert to oversee the equity issue, which was not open to existing shareholders) were satisfied in just 10 days. Under normal circumstances the process would take up to four weeks.
The media and market reaction to the swift actions of the Amadeus board were overwhelmingly positive, and despite the market conditions the shares were placed at a very competitive discount. Amadeus has improved its liquidity position by €4bn and now believes it has sufficient capital to guide the company through a continued downturn in global travel as a result of the ongoing coronavirus pandemic.