Thomas Cook has agreed to a rescue deal with China’s Fosun Tourism Group, its banks, and a majority of its bondholders worth £900m, the group confirmed.
The deal will see Fosun, which already owns 18% of the Thomas Cook Group, acquire 75% of the tour operator business and 25% of the airlines unit in return for a £450m capital injection. Meanwhile, Thomas Cook’s lending banks and bondholders will contribute a further £450m for 75% of the airline and up to 25% of the tour operator business.
Shanghai-based Fosun also owns the holiday resort chain Club Med and the Premier League football club Wolverhampton Wanderers.
Thomas Cook warned that its new owners may delist the group from the London Stock Exchange, with existing shareholders’ interests likely to be “significantly diluted” by the recapitalisation plan.
Amid tough online competition, Brexit, and high jet fuel prices however, the £900m cash injection is deemed as necessary to help the company avoid bankruptcy as it heads into winter, when holiday bookings are at their lowest.
Thomas Cook uncertainty continues
In May, Thomas Cook reported a £1.5bn loss for the first half of the financial year, mostly because of a £1.1bn cut in the estimated value of its package holiday division. Recently, the company’s shares had been hovering around 7p but fell a further 14% on Wednesday morning to only 6p.
Russ Mould, an investment director for AJ Bell, warned the rescue deal could mean bad news for other investors with Thomas Cook shares. He said: “Shareholders in the troubled travel company may have to accept that their investment could be worthless.
“An update on its refinancing reveals that Chinese group Fosun and Thomas Cook’s lenders are going to get the lion’s share of the equity, meaning very little – if anything – is left on the table for the other shareholders.
“That would explain why the shares have fallen another 14% on the latest news. Investors are simply trying to cash out and crystalise any value left in their investment before the refinancing, for fear there could be nothing left if they wait.”
The deal is yet to be finalised, and is subject to credit and investment approvals, in addition to performance conditions, due diligence, and agreement with existing stakeholders.
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