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Travel agency Helloworld (ASX: HLO) has today announced a $50 million equity raising to help cope with industry disruption, as bookings are expected to remain at 10-12 per cent of pre-coronavirus levels.
CEO Andrew Burnes and executive director Cinzia Burnes will throw $5 million into the bargain, with the raising aimed at providing balance sheet flexibility at a time when monthly cash burn is at around the $2 million mark.
The company's monthly operating costs stood at $22.9 million before the pandemic, but cost saving initiatives including the closure of offshore offices in Manila and Mumbai have helped reduce outlays to $4 million post-JobKeeper and the New Zealand wage subsidy.
The group continues to generate income of $2 million per month, mostly from transaction fees and commissions, and is seeing domestic total transaction volume (TTV) increase week by week as borders open up. Currently around 70 per cent of that TTV comes from Helloworld's corporate business.
But the company only had $31 million in cash as at the end of June, compared to $147.8 million for the same date in 2019. Lenders have extended maturity dates for short-term facilities out to April and September in 2022, but Helloworld could still use the extra liquidity.
That is why it is raising funds at $1.65 per share, representing a 16 per cent discount to the last trading price.
The equity raising comprises a 27.1 million institutional placement and a $22.9 million non-renounceable entitlement offer, in total representing almost a quarter of existing Helloworld shares on issue.
After the raising Helloworld is expected to have a pro forma liquidity position of $187.1 million.
The company added it was still owed $3.7 million by Virgin Australia (ASX: VAH), whose administrators Deloitte have indicated won't have enough recoveries to pay creditors in full.
"At this stage, it is unclear what recovery may be realised. Helloworld has not experienced material debtor defaults," Helloworld stated in a presentation.
"Debtor provisioning at 30 June 2020 is expected to increase from historical levels reflecting slower collections than achieved historically.
"Suppliers, particularly airlines and cruise companies, introduced unilateral changes to their refund policies including some businesses refusing to refund at all, imposing additional cancellation and refund charges, insisting on bookings being paid for in full when it was unlikely for the aircraft or cruise to depart before they would consider a refund (rather than just refunding the deposit) and significant delays (3 months) in receiving refunds."
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