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TUI had received state-backed loans in two tranches this year, and an additional billion to two billion euros was being discussed. 

The funds could come from Germany’s new stabilization fund and include a mix of equity and hybrid capital, Germany said. TUI was one of two rescue operations for travel companies that had been unable to cope with the travel crisis caused by the coronavirus, people familiar with the matter said, according to a source with direct knowledge of the talks.

The sources said the current talks were focused on strengthening the company’s capital base. TUI said it would look at options for its finances in the coming months after renewed travel restrictions and declined to comment on a possible third bailout. The German Government has said that it will not comment on the ongoing negotiations with the European Commission, the EU’s financial supervisory authority.

TUI’s largest shareholder, Russian billionaire Alexey Mordashov, who owns 25% of the London-listed company, had no immediate comment. Sources familiar with the situation have previously said he is expected to participate pro rata in a potential capital increase.

Last month TUI made it clear it wanted to wait for the share price to recover before raising capital. It has announced plans to issue new shares, but asset sales are also an option to make money.

TUI’s share price extended its gains on Monday, rising 4.4% to 1528 GMT as investors hoped the arrival of the COVID-19 vaccine would help the company recover. The company, which took 23 million people on holiday last year, lost 1.1 billion euros in the first three months of this year after tourist stopped travelling due to COVID-19, wiping out revenues and burdening its travel business and balance sheet by burning through its cash reserves. One attendee said the reaction of share prices on Monday showed that people believed the government shutdown had disrupted, but not destroyed, TUI’s business model.

The rise in the share price also means that TUI can sell new shares to the state at a nominal value of 2.56 euros and avoid capital deductions in advance. The lowest possible price for a capital increase is the nominal value per share.

TUI is expected to publish its annual results next month and the government has said it wants to buy 25% of the new shares at a large discount because it would allow TUI to exit at a loss at a later date. 

Possible state involvement would also help to secure additional capital injections through their profits – the so-called “silent deposits.” 

A potential equity investment by the government would also help to safeguard an additional injection of non-voting capital dubbed silent participation by the government.