Amadeus told not to reduce debt levels

Investors in Amadeus, the Spanish travel booking-technology group, want the company to maintain its debt levels as it continues to enjoy significantly lower borrowing costs than the Spanish government.

In a sign that international investors continue to distinguish between Spain’s internationalised businesses and the country’s domestic economy after a European rescue for its banks, Luis Maroto, Amadeus’s president and chief executive, told the Financial Times that he had faced calls to maintain its current debt levels.

“We have been borrowing at an average yield of about 4 per cent, a level well below many European countries,” Mr Maroto said. “Investors are now telling us, ‘Don’t reduce your debt more.’”

This is in contrast to many other large Spanish companies, such as Telefónica and construction groups, which have been punished by investors as they grapple with large debt piles that are increasingly difficult to refinance at low prices owing to the sovereign debt crisis.

Mr Maroto said that the company’s share price, which has been the eighth best-performing large European stock this year, has been able to resist the sharp falls suffered by the majority of its fellow Ibex 35 index members because of investors increasingly being able to view certain Spanish companies away from the domestic news flow.

“There are some investors who tell us, ‘I need to reduce my exposure to these countries like Italy or Spain, and even if the business has a small amount of exposure to that country,’” he said.

“But I don’t have the sense that investors are paying that much attention to the fact we are listed in Spain. We got very good conditions for our bonds, and I think people understand the fundamentals of the company very well,” he said.

Shares in Amadeus, which has seen organic revenues increase from €863m in 2009 to €1bn last year, and has seen its share of revenues outside of Europe increase to more than 50 per cent, has risen in value by 27 per cent this year, against a drop of 23 per cent since the start of the year.

Amadeus, which has its roots in a partnership for computerised reservation between various European airlines in 1987, was bought by the private equity groups BC Partners and Cinven in 2005, before being refloated in one of the few listings during the crisis that has provided investors with returns.

“We are present in 195 countries and this helps us a lot. The economy is suffering everywhere, but it is not the same what is happening in Brazil and in Spain,” he said, adding that Amadeus’s business model also means that it always receives its fee when a flight is booked or a ticket is sold, regardless of pressures on airlines that could make them need to reduce seat costs.

“We are not a company really with a lot of dependency on the domestic market or the administration,” Mr Maroto said. “Even our headquarters here is smaller than some offices we have outside the country.”

The company has been able to refinance a large chunk of its debts, which stood at €1.76bn at the end of March, or 1.65 times earnings before interest, taxation and amortisation, since it was relisted following its time under private equity ownership.

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