Thomas Cook has said it is advanced talks with bondholders for an additional £150 million cash injection to see it through the winter season.
The money is on top of plans announced a month ago, on July 12, for banks and its largest shareholder, Fosun, to pump in £750m as part of a rescue plan.
The additional £150m would give the ailing tour operator ‘further liquidity headroom’, Thomas Cook said.
The announcement brings to £900m the amount that Thomas Cook hopes to raise from Chinese firm Fosun, its banks and bondholders. It hopes to implement the arrangement in early October.
Thomas Cook said existing shareholders were ‘expected to be significantly diluted’ by the deal but may be allowed to participate in the recapitalisation on terms to be agreed by Thomas Cook, its creditors and Fosun, according to the Daily Telegraph.
The deal would see Thomas Cook reduce its leverage by converting £650m of bank debt and €1.2bn (£1.1bn) of bond debt into equity.
The rescue deal is expected to include a £450m injection from Fosun, with an additional £300m coming from the travel company’s banks.
Thomas Cook said: “The discussions with noteholders include the injection of additional capital on top of the previously announced £750 million. This additional capital, of approximately £150 million, will provide further liquidity headroom through the coming 2019/20 winter cash low period and ensure the business can continue to invest in its strategy.
“As stated in the Company’s announcement on 12 July 2019, the proposed recapitalisation will require a reorganisation of the ownership of the Tour Operator and Airline businesses which would result in a significant amount of the Group’s external bank debt (£650 million) and bond debt (€1.15bn) being converted into equity, resulting in a substantial deleveraging of the Group.
“Existing shareholders are therefore expected to be significantly diluted as part of the recapitalisation, although they may be given the opportunity to participate in the recapitalisation on terms to be agreed between among others, the Company, Fosun, and the converting financial creditors. The Group expects to implement the recapitalisation in early October 2019.
“The recapitalisation proposal remains subject to certain conditions including performance conditions, due diligence, further discussions and reaching agreement with a range of company stakeholders (including the pension trustees, noteholders, other financial creditors and Fosun’s shareholder approval), and receipt of any regulatory and anti-trust clearances or approvals.”
Shares in Thomas Cook fell 25% in early trading on Monday, following the announcement.
Meanwhile, Thomas Cook said reports in a Turkish newspaper that Anex Tour Group is in talks to acquire the whole company are not true.
Turkish newspaper Daily Sabah claimed Anex had spoken to senior management at Thomas Cook in the UK and talks are expected to be finalised next month.
Anex Tour, owned by tycoon Neset Kockar, bought a 6.7% stake in Thomas Cook on August 1, increasing its share to 8% 24 hours later. It is currently the second-largest shareholder, after Chinese investor Fosun International.