Flight Centre share price on watch after new funding deal

The Flight Centre Travel Group Ltd (ASX:FLT) share price could be on the move on Wednesday after announcing a new debt deal…

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The Flight Centre Travel Group Ltd (ASX: FLT) share price was out form last month and tumbled a disappointing 15% lower.

Concerns over a delay in the recovery of tourism and travel markets appear to have been weighing on the travel agent's shares.

It is perhaps because of these same concerns that Flight Centre has just announced its decision to take on more debt.

a woman

What did Flight Centre announce?

This morning Flight Centre announced that it has secured access to a debt facility of up to 65 million pounds.

According to the release, the company intends to draw down these funds as and when it is necessary to help offset the coronavirus' impact on its United Kingdom-based operations.

The release explains that this funding has been made available to the company via the Bank of England's COVID Corporate Financing Facility.

This is a program that has recently been implemented in the UK. It has been designed to support short-term liquidity among companies as they work to overcome the disruption caused by the pandemic and the restrictions that have been put in place to limit its spread.

The initial notes that will be issued under the facility are scheduled to mature in March 2021. However, management believes they should be capable of being extended for a further 12 months through the issue of further notes under the facility.

Should you invest?

While I believe that Flight Centre now has ample liquidity to ride out the storm, I wouldn't be in a rush to invest.

Given the dilution of its equity raising and the likelihood that the next couple of years could be very tough, I believe investors will be able to pick up Flight Centre shares at much fairer prices in the future. In light of this, I think it would be best to keep your powder dry for the time being.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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