Oasis Atlantico Update - May 2020

I spent some time on the phone recently with Alexandre Abade, Chief Executive of Oasis Atlantico, to seek to get an understanding of the current position of the Oasis group of companies as they seek to navigate their way through the choppy waters of 2020.

As a Portuguese Company, with head office operations in Lisbon, their management team has been working mainly from home as they deal with a lockdown, despite the mercifully low numbers of infections and deaths in Portugal. As with the UK, there is heavy pressure on the government to start to ease lockdown, and they expect to be back in their office from the 2nd May (with their schools opening again on the 18th May), although these arrangements will be monitored every 2 weeks.

Like many businesses, Oasis have been seeking government support and have secured a government-backed credit line and a further significant medium-term loan (pending final signatures) over the past couple of weeks. Additionally, as mandated by the government, they can benefit from a 6-month repayment and interest holiday on bank loans, and 90% of these have already been formally agreed with their banking partners. In the current levels of uncertainty, the focus of management is to ensure cash flows over the next 6 months are as strong as possible.

Oasis are owed sums by the package tour operators around Europe for holidays that were taken towards the end of 2019 and beginning of 2020, and fortunately some of these have now started making payments against these debts - no doubt as national governments around Europe deliver on their support packages for the hard-pressed travel and tourism industry. Others, including TUI, are indicating that they will start making payments next month, while some of the Scandinavian operators are seeking clarification on their obligation to offer funds to their consumers prior to committing their cash flow elsewhere. While it is a difficult and unprecedented set of circumstances, Alexandre reports that generally they and their customers are working well together and being as mutually supportive as possible to ensure that when things become clearer their relationships survive this storm.

The Oasis hotels in Morocco and Brazil are currently closed, and all except one of their hotels in Cape Verde is also closed. The exception is the hotel on the capital island of Praia, where the Oasis hotel is being used to quarantine returning Cape Verdians for 2 weeks when they return from overseas. As a consequence this hotel is operating at about 50% of capacity. In the closed hotels, many staff are being retained on 30% salaries, while the Cape Verde government uses grants and tax cuts to build those incomes to 70% of their normal value.

As with elsewhere, thoughts are now turning to the opening up of the borders and how business might be safely resumed. The island of Sal is of particular interest as this is where the 2 largest Oasis hotels are, and also is an island that has yet to experience its first case of Covid-19. The government is looking at ways to maximise the fairly unique opportunity this presents, and some of the Oasis tour operators are making it clear that they plan to re-start flights to Sal as soon as the borders are re-opened. Others are more cautious. TAP, the national airline of Portugal is planning to resume its Cape Verde services.

From a corporate finance perspective, Oasis is now running a series of budgeting exercises around a variety of scenarios for the remainder of 2020. Within those they are currently planning on meeting interest and capital obligations for loans and bonds with investors as normal. I have, however, asked that if this proves too challenging that they give us as early a warning as possible so that we can keep everyone informed of developments.

I will seek to get a fuller briefing on the plans later in May when the team at Oasis hope to have a little more clarity on how things develop.

In the meantime, I am sure you all join me in wishing the management and staff of Oasis Atlantico the very best as they work through the coming days. I am, certainly reassured that they have a diligent, competent and robust management team in place, doing all they can.

Brad Lincoln