Struggling holiday firm locked in £750m rescue talks

Holiday firm Thomas Cook is in £750m rescue talks with the banks and its largest shareholder Fosun.

The travel firm, who’s airline business is based in Manchester, has been struggling with falling bookings and the uncertainty surrounding Brexit.

The firm said the ongoing uncertainty contributed to a £1.5bn half-year loss that it reported in May.

The rescue deal would see the Chinese investor Fosun buy the firm’s tour business.

Chief executive Peter Fankhauser said the plan was “not the outcome any of us wanted” but insisted it was “pragmatic”.

If the deal goes ahead the cash injection will give the group enough money to trade through to the end of next year.

The firm launched a strategic review earlier this year but the European travel market has become “progressively more challenging”.

Mr Fankhauser said. “After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the board has decided to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.

“While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees.”

People who currently hold shares in the firm will see the value of their investment “significantly diluted” as a result of the deal.

The travel firm had already announced plans to cut costs axing 150 jobs due to difficult trading and higher fuel expenses.

The value of shares in Thomas Cook have plunged by more than 80% over the past 12 months.

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “Thomas Cook – a one-time stalwart of the UK corporate world and a name with a history which goes back to the middle of the 19th century – looks like it will end up in the hands of its major Chinese shareholder Fosun.

“Customers may not see a huge difference, at least in the short term.

“However, the details of the rescue plan outlined by the travel operator suggest there will be very little left on the table for existing shareholders with debt being written off and converted into shares.

“Today’s news is the latest example of the need for businesses to be careful with their balance sheets, particularly when operating in an industry where costs and earnings can be unpredictable.

“This has been exacerbated by Brexit uncertainty and Thomas Cook was in a position where it needed cash just to get through the coming months with a plan to sell the airline business not coming off.

“Even the agreement mooted today does not have a clear flight path as it still needs the approval of shareholders and creditors.”

He added: “Anyone who has booked a holiday with Thomas Cook will want to see the refinancing deal sorted as soon as possible so they aren’t fretting over whether their holiday provider is actually around to fly them to the beach.”