Tuesday 17 September 2019

Thomas Cook lenders agree rescue deal

British travel operator Thomas Cook says it has agreed the main terms of a rescue package that will see Hong Kong's Fosun Tourism take over its tour operations, and creditor banks and bondholders acquire its airline. Photo: PA
British travel operator Thomas Cook says it has agreed the main terms of a rescue package that will see Hong Kong's Fosun Tourism take over its tour operations, and creditor banks and bondholders acquire its airline. Photo: PA

Paul Sandle and Alistair Smout

British travel operator Thomas Cook says it has agreed the main terms of a rescue package that will see Hong Kong's Fosun Tourism take over its tour operations, and creditor banks and bondholders acquire its airline.

The world's oldest travel company, and pioneer of the package tour, has struggled with intense competition in popular destinations, high debt levels and an unusually hot summer in 2018.

The debt burden meant the company had to sell three million holidays a year just to pay the interest, it said last month.

Thomas Cook also said in July that it was working to secure new investment from shareholder Fosun which would see the group take control of the business, along with its lenders, whose debt would be converted into equity.

The terms announced yesterday will see Fosun - whose Chinese parent owns all-inclusive holiday firm Club Med - contribute £450m (€495m) of new money in return for at least 75pc of the tour operator business and 25pc of the group's airline.

Thomas Cook's lending banks and bondholders will stump up a further £450m and convert their existing debt to equity, giving them in total about 75pc of the airline and up to 25pc of the tour operator business, the group said.

The recapitalisation plan, which is subject to a legally binding agreement between the parties, will result in a significant dilution in existing Thomas Cook shareholders' interests, the company said, but it had decided it was the best way to secure the future of the group.

Shares in Thomas Cook fell 15pc to just under 6p in early trading yesterday.

AJ Bell investment director Russ Mould said shareholders may have to accept that their investments could be worthless.

Reuters

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