15th Oct 2014 16:00
LONDON (Alliance News) - Travel operator TUI Travel PLC Wednesday said it has entered into arrangements to provide new investment of up to GBP15.3 million, and a new guarantee of GBP3 million, for its TUI Russia & CIS joint venture with S-Group.
The CIS is the Commonwealth of Independent States, including Russia and other former members of the Soviet Union.
"Given the ongoing challenging trading environment for tour operators located in the Russian and Ukrainian source markets the above arrangements are prudent as we enter into the off-peak Winter period," TUI Travel said in a statement after the market close Wednesday.
TUI Travel holds 49% of the Russia & CIS joint venture, with S-Group holding 51%. The venture was launched in 2009. S-Group is wholly-owned and controlled by Russian businessman, Alexey Mordashov, who owns approximately 25% of TUI AG, TUI Travel's German parent, with which TUI Travel is in the process of merging.
TUI Travel, which owns Thomson and First Choice, said existing guarantees of GBP12.2 million and existing shareholder loans of GBP4.6 million, will also be renewed.
Earlier this month, TUI Travel said it booked a GBP27 million write-down during its financial year just ended on the loss-making Russian business, hit by tough trading conditions for its tour operators in the Russian and Ukrainian markets in the wake of the political crisis in Ukraine.
"The Russian business is currently loss making. The GBP27 million was from the devaluation of the Russian ruble and our inability to raise prices against that backdrop, which has put pressure on the margins. We are taking a cautious view for winter, where we are reducing capacity. We will then assess our programme for next summer," TUI Chief Executive Peter Long said earlier this month.
It said its reducing capacity by 30% for its Russian holiday programme.
TUI Travel shares closed trading Wednesday down 2.1% at 330.50 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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