Travelex proposes to issue additional New Money Notes
Travelex today announces that it has launched a consent solicitation in connection with the issuance of an additional number of New Money Notes with net value of £20 million. The aim is to provide the company with fresh liquidity as Travelex extends its business perimeter to include legacy retail platforms and to fund working capital in anticipation of a return of consumer travel.
The announcement is made shortly after Travelex’s debt securities got admitted to trading on the Vienna MTF.
Travelex explained today that, since the finalisation of the restructuring and recapitalisation of Initial FundCo in August 2020, the impact of the Covid-19 pandemic has intensified globally and continues to delay the recovery of the international travel market. The business has published an updated view on trading and liquidity, underpinned by external data sources demonstrating a more gradual recovery profile, and additional cost savings initiatives to help conserve liquidity into 2021 when recovery is now expected to occur.
On the updated projections, £45 million of additional funding is required to ensure the business is appropriately capitalised to rebuild working capital for when trade returns, with OFC businesses being transferred into the group projected to increase the business perimeter by EBITDA of £28m (or c.48% vs previous Business Plan FY22 EBITDA) against £45m (c.54%) projected increase in New Money Notes.
A significant transformation and restructuring exercise was undertaken in 2020, Travelex says. The Group was split in two, Initial Fundco (IFC) and Optional Fundco (OFC), to protect the most resilient parts of the business and warehouse the retail operations that are forecast to have a slower recovery.
Regulatory approval has now been received to transfer entities in the following countries to New Travelex: Australia, China, New Zealand, Oman, Bahrain, Singapore and Hong Kong. Approvals are in progress still but expected to be finalised in the coming weeks for Nigeria, Qatar, Malaysia, Thailand, Turkey, UAE, UK and Brazil.
Subject to confirmatory due diligence, which has been commenced, the New Travelex Group intends to exercise the option to purchase the following Optional FundCo businesses: The Netherlands (a branch of which is expected to acquire the Italian ATMs business), Germany and Switzerland operations in Europe Retail. All remaining OFC operations are in the process of winding down, including the North American entities.
Travelex notes that UK retail is owned and controlled separately by TFCS. Any transfer of that business will be subject to separate negotiations and transfer mechanics.
To date, 93% of targeted fixed cost reductions have been banked across the two years, at £302m, with a 35% reduction in headcount overall. Remaining costs are targeted in rent and third party where there has been success to date in finalising savings.
The new Board of Directors for the New Travelex Group was set up over the period from August 2020 to January 2021, with the Chairman (Mike Rees) and wider Board representatives (Alexander Filshie, James Westcott & David Hargrave) having backgrounds containing significant blue-chip banking and financial services experience.
KPMG has been appointed as new Group auditors and internal governance bodies have been rejuvenated post the restructure including a major focus on managing business risks, including addressing technology risk with improved infrastructure through a recently-concluded contract with a major cloud computing services provider.