S&P downgrades TUI

Standard & Poor's said it lowered TUI AG long-term corporate credit rating to B+ from BB- and its senior unsecured debt ratings to B from B+. Recovery ratings remain at 5.

The agency lowered the junior subordinated debt rating to CCC+ from B- with recovery rating unchanged at 6.

The outlook is stable.

S&P said the downgrade reflects TUI's highly leveraged financial profile, the group's reduced business diversification following the agreed sale of container shipping unit Hapag-Lloyd AG, concerns about the cyclical prospects for TUI's tourism businesses in the light of increasing recessionary pressures in Europe and some remaining uncertainties about the use of proceeds from the HL sale.

Ratings reflect the group's complex structure, highly leveraged financial risk profile with a lease-adjusted net debt-to-EBITDA ratio of 6.6x at Sept. 30, cash flow leakage to minorities and exposure to a seasonal and cyclical industry facing margin pressures and high event risks, the agency said.

These risks are mitigated in part by TUI's market-leading positions in European tourism, as well as its geographically well-diversified sales, the agency noted.

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