S&P cuts TUI to BB-, notes to B+, B-

Standard & Poor's said it lowered its long-term corporate credit rating on TUI AG to BB- from BB, owing to ongoing adverse operating trends in the tourism and container shipping markets. The ratings were removed from CreditWatch, where it was placed with negative implications in March.

The outlook is negative.

S&P also said it lowered its ratings on the group's senior unsecured issues to B+ from BB- and maintained them on CreditWatch with negative implications due to the potential for increased structural subordination in case of a successful merger of TUI's tour operator business with First Choice Holidays plc. The CreditWatch will be resolved and the senior unsecured debt ratings lowered to B upon approval of the merger.

TUI's junior subordinated debt also was lowered to B- from B and removed from CreditWatch with negative implications, as the contractual terms provide certainty on the subordination.

Although the proposed merger will only have a marginal impact on the group's business profile, the agency said it could further weaken current financial debt protection at TUI, owing to structural subordination issues. The group also faces decreasing cash flow from operations, S&P said.

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