Encouraging soundings from investors over the weekend are expected to see Flight Centre upsize its capital raising to $700m from the $500m it had initally pencilled in.
The under-pressure travel agency has been sounding out the market about a $500m equity raising through Macquarie Capital and UBS, as part of efforts to bolster its balance sheet while the global travel industry effectively shuts down.
But following firm support from investors in the past 48 hours the Graham Turner-headed-Flight Centre could target a higher amount.
Luminis Partners is Flight Centre’s adviser.
A deal could occur this week that will see the group raise equity at $7.20 a share, compared to Friday’s close of $9.91.
Private equity fund Certares has emerged as a potential suitor for the agency, which has seen its shares crash nearly 80 per cent in the past three months. New York-based Certares was founded in 2012 by former JPMorgan banker Greg O’Hara and has offices in Luxembourg and Dubai.
Its focus is on the travel, tourism, hospitality, business and consumer services.
Investments by the group so far have included Californian luxury river cruise operator AmaWaterways, London-based corporate travel company American Express Global Business Travel, a subsidiary of TripAdvisor, Liberty TripAdvisor Holdings, France’s largest traditional travel company Marietton Developpement, Portuguese river cruise company Mystic Invest, Dubai travel management company Nirvana Travel and Tourism and New York-based Travel Leaders.
Even if Certares opts to sidestep a deal involving Flight Centre, it has rich pickings in Australia’s tourism and travel space, with most companies seeing substantial declines in their market price on the back of the COVID-19 crisis.
Its interest comes after Bain Capital agreed to inject equity in the Australian-listed online travel agency Webjet last week along with other investors, as it tapped the market for $346m at $1.70 per share after upsizing the raising on the back of strong demand.
Kohlberg Kravis Roberts also made advances towards Webjet, but it is understood that its proposal was rebuffed by the company.
Webjet’s market value on Friday was about $377m, with its shares closing at $2.71.
Earlier this year, shares were worth more than $10.
In the looming Flight Centre raising, investors would be offered shares at a discount of more than 30 per cent.
The nation’s largest travel agency has cut 6000 jobs from its global workforce and closed 250 of its retail shops in Australia, saying it has been significantly impacted by government-imposed international travel restrictions, coupled with major reductions in airline capacity.
Flight Centre currently has a $1bn market value and $10m of net debt, a far cry from its January market value of $4.5bn market value.
Back then, its shares were worth about $44.40, yet its traded price on March 19 was $9.91, which gave the company a $1bn market value.
For the half year to December, Flight Centre had $1.17bn of cash and equivalents.
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