Thomas Cook fights to stay afloat

Giant tour company seeks short-term seasonal bailout funds from shareholders and creditors

A Thomas Cook Airbus A321-200 takes off at the airport in Palma de Mallorca, Spain. (Reuters Photo)

LONDON: Thomas Cook, one of the world’s oldest and largest travel companies, is in a race against time to stay afloat.

The debt-laden London-based company confirmed on Friday that it is seeking £200 million (US$250 million) in extra funding to avoid collapse.

The company said it was in talks with stakeholders including Fosun Tourism Group, its China-based major shareholder, to bridge the funding gap and stave off entering administration.

It said in a statement that the money required would be a “seasonal standby facility” and come on top of the £900 million it had already raised from Fosun and its lenders. Travel firms typically spend more than they earn in the autumn season.

Thomas Cook shares fell as much as 28% after the announcement.

If the company goes under, as many as 180,000 people could be stranded abroad. Thomas Cook employs 22,000 staff members around the world, including 9,000 in its home market.

The company that invented the package holiday has gone within a year from concern about how a freak  European heatwave in 2018 hurt sales to a full-on fight for survival.

It is trying to save itself by swapping existing debt into shares, leaving Fosun holding the majority of its tour-operating business while a group of creditors will control its airlines. On Sept 17, it filed for Chapter 15 court protection in the United States.

The company needs the support of investors holding at least 75% of its debt when it puts its restructuring proposal to a vote on Sept 27, a crucial step to get the plan approved by a UK court.

“The next few days are going to be pretty crucial for Thomas Cook,” said Neill Keaney, an analyst at CreditSights in London. “Time is of the utmost importance and things can unravel pretty quickly.”

A group of hedge funds is threatening to block the rescue because it may stop them cashing in holdings of credit default swaps that pay out when a company defaults.

A major concern for now is that customers will stop buying vacations and flights from Thomas Cook for fear that the company won’t be around to honour their bookings.

The British Airline Pilots Association called on the UK government on Friday to intervene and pressure banks to provide additional liquidity.

The stock was trading down 22% at 3.50 pence Friday morning in London, valuing the travel operator at around £54 million, the lowest since the company took on its current corporate structure in 2007.