A leading analyst has cast doubt over whether Thomas Cook’s £750m rescue plan, announced at the end of last week, will work.
Citigroup’s James Ainley suggested the package, which would put Chinese conglomerate Fosun in control of the 178-year-old tour operator, could be blocked by its bondholders.
So how has it come to this and should holidaymakers be concerned?
What has happened to Thomas Cook?
The travel company, which employs 21,000 staff around the world and operates more than 560 stores in the UK, has “suffered as customers shifted from the high street to the internet, threatening its ability to service a £1.6bn debt pile”, says the Financial Times. It came close to collapse eight years ago and took on large loans to survive.
“Tough trading conditions have been exacerbated by Brexit uncertainty,” adds the FT.
Last Friday, the embattled company confirmed that it was in “advanced discussions” to secure new funding from its banks and Fosun, which owns the holiday resort chain Club Med. The £750m deal would hand control of its package holiday business to the Shanghai-based investor in return for a cash injection. Meanwhile, banks and bondholders would take a majority stake in its airline and a minority stake in the holiday unit.
The extra cash “is designed to see the company through the winter, when holiday bookings are at their lowest, affording it time to cut costs and raise money by selling its airline division”, explains The Guardian.
Will the deal go ahead?
Citigroup analyst James Ainley, described by The Daily Telegraph as “one of Thomas Cook’s most vocal critics”, has calculated that shares would be worth just 3p if the plan goes ahead.
“The uncertainties are significant and the risk of the process stalling seems high,” said Ainley, who sent shares in the company plunging in May by downgrading its stock to zero pence.
For the package to work, Thomas Cook needs a “strong turnaround plan, about which little detail has yet been given”, he added.
A spokesman for Thomas Cook said: “The board is clear in its view that it is in the best interests of all the group’s stakeholders, including bondholders, to pursue a full re-capitalisation supported by new investment into the business. It is a pragmatic and responsible solution which provides the means to secure the future of Thomas Cook.”
Should holidaymakers be worried?
On Friday, Peter Fankhauser, Thomas Cook’s chief executive, said there would be “no impact from today’s announcement on our holidays or our flights”.
Meanwhile, holidays booked through Thomas Cook are Atol-protected, meaning any customer would be entitled to a full refund or replacement holiday should the tour operator collapse before their scheduled departure time.
The Civil Aviation Authority would also protect package holidays and cover arrangements to return customers if the operator collapsed while they were on holiday.
However, some holidaymakers could be caught out if they have booked on Thomas Cook’s airline, which is separate from the tour operator, and sells flight-only trips, some of which are not Atol-protected.
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