Hostelworld is to conduct a share placing in order to help strengthen its financial position in the face of the challenges posed by the coronavirus.
In a statement to the stock exchange, the Irish based company said it intends issuing new ordinary shares representing approximately 19.9% of its existing ordinary share capital.
The group has also agreed terms for a three-year revolving credit facility to provide €7m of additional liquidity, as it had no existing debt facilities prior to the Covid-19 crisis.
It has also agreed terms for a short-term financing facility of €3.5m which it plans to use for discharging a limited number of large partner invoices.
"Together with the proposed new banking facilities, the placing will materially strengthen the Group's position in an uncertain environment," it said.
"The Board has concluded that the placing is in the best interests of shareholders and will promote the long-term success of Hostelworld."
The company, which is a leading online booking platform for hostels, said it had decided not to pay a cash dividend for this year, despite remaining committed to its stated policy of paying out 20-40% of adjusted profits.
It had previously decided to cancel payment of a final dividend for 2019, which it said was the right course of action in these exceptional circumstances.
It said future payment of cash dividends will be subject to the group generating adjusted profit after tax, its cash position and any restrictions in its banking facilities.
"In the interim, the board is considering a proposal to issue new ordinary shares by way of bonus issues to shareholders in lieu of a cash dividend," it said.
"If implemented, the bonus issues will be subject to shareholder approvals and the number of new ordinary shares to be issued will be determined by the board at the time taking into account market conditions."
It said Covid-19 has driven a sharp reduction in trading volumes in the first half of the year.
But as a result of the a programme of cost reductions and cash conservation initiatives, as well as minimal booking volumes to the end of June, it expects an earnings before interest, tax, depreciation and amortisation loss in the range of €8 million to €9 million, down from an €8.9 million profit in the same period last year.
It said it cannot provide guidance on the full-year out-turn because of the ongoing uncertainty.
"Based on the Group's customer survey data and internal data provided by its affiliate hostels showing that the vast majority of hostels expect to be open by the end of July 2020, the directors expect that pent-up demand will lead to a quick recovery as travel restrictions ease," it said.
