Moody's downgrades TUI

Moody's Investors Service said it downgraded TUI AG's corporate family and senior unsecured long-term ratings to Ba3 from Ba2 and subordinated debt rating to B2 from B1.

The ratings remain on review for possible further downgrade, where they were placed on Aug. 11.

The downgrade follows TUI's announcement of its third-quarter results for 2006, which confirmed that full-year earnings will be impacted by higher operating costs and lower-than-expected freight rates in the shipping business and additional restructuring charges in the tourism division. Moody's said that any further downgrade to the corporate family rating will likely be limited to one notch.

The downgrades were primarily prompted by the impact on the company's credit metrics of its weaker-than-expected operating performance in the shipping division, the anticipation that further restructuring charges may have to be recorded in the tourism division and Moody's view that TUI may not achieve the target metrics laid out when the initial ratings were assigned in October 2005, at which time the agency expected TUI's adjusted-debt-to-EBITDAR ratio to decrease from 5.8x.

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