The Webjet Limited (ASX: WEB) share price will be on watch on Thursday after it followed the lead of rival Flight Centre Travel Group Ltd (ASX: FLT) by bolstering its liquidity.
What did Webjet announce?
This morning the online travel agent announced the successful pricing of an offering of 100 million euros (A$163.1 million) convertible notes due in 2027.
Webjet's Managing Director, John Guscic, explained: "This Offering supports our ongoing focus on maintaining a strong balance sheet as we continue to navigate the challenging operating environment caused by COVID-19."
The chief executive expects the notes to diversify the company's funding sources and increase its financial and strategic flexibility. He also believes it will put Webjet in a position to take advantage of any opportunities in the future.
He added: "We continue to believe the strength of Webjet's capital position in the current uncertain environment will provide a strategic advantage longer term, enabling the Company to execute its strategy and take advantage of opportunities as they arise."
What will the funds be used for?
The company will use the proceeds to repay $50 million of its existing term debt, whilst extending remaining term debt maturity into late 2022. It will also use some of the proceeds for potential acquisitions and ongoing capital management.
Though, management notes that there is no agreement or understanding with respect to any potential acquisitions or investments at this time.
Trading update.
Webjet also released a trading update with its offering. It advised that, as expected, its total transaction value (TTV) and revenue in April and May 2020 were nominal.
And while the company has started to see some booking activity in its Australian OTA and WebBeds businesses, it expects any revenue contribution in the near term to only be modest.
It also advised that its operating costs from April 2020 to the end of June 2020 were averaging $15 million month. This is a reduction of approximately $13 million per month from pre COVID-19 expenditure.
Finally, on another note, Webjet has just announced an agreement with Afterpay Ltd (ASX: APT), which will see it offer customer buy now pay later options. It is available on flight, hotel, and package bookings up to $2,000.
