Thomas Cook set to receive £450m Fosun rescue package
Thomas Cook is close to agreeing a rescue deal with a major shareholder that could result in the company’s delisting.
The travel operator is agreeing bailout terms with Chinese investment firm Fosun that will see it throw £450m into the ailing company for a 75 per cent equity stake.
Read more: Thomas Cook shares plunge on fresh funding talks as it nears Fosun tie-up
Fosun will also acquire 25 per cent of Thomas Cook’s airline business.
Thomas Cook’s share price is down by nearly 15 per cent following the news.
The company’s core lending banks and noteholders will also put in £450m of new money for 75 per cent of the equity of the airline, and up to 25 per cent of new equity in the tour operating business.
The firm said the current intention of the board was to maintain its public status but added: “The implementation of the proposed recapitalisation may, in certain circumstances, result in the cancellation of the company’s listing.”
The deal, which Thomas Cook is aiming to secure in early October, needs to be agreed among all involved parties and by some of the firm’s key stakeholders.
Thomas Cook said last month that shareholders may be given the opportunity to inject investment into the firm alongside Fosun.
“The board continues to proceed on the basis that a recapitalisation, achieved with the support of shareholders, is the preferred means of securing the future of the group for all its stakeholders (including customers, suppliers and employees), while at the same time enabling the existing shareholders to continue to retain an investment in the company,” it said.
However, it warned that its recapitalisation plan could result in the “significant” dilution of existing shareholder interests in the airline business, “subject to feedback from creditors, the new money providers and other stakeholders”.
Read more: Thomas Cook: How did it end up like this?
The £300m cash injection secured from its banks in May has been allowed to lapse, the firm said.
The news of the rescue deal follows a torrid financial time for Thomas Cook. In May the firm reported a £1.5bn half-year loss as the firm struggled with a bumper heatwave in Britain, Brexit uncertainty and rising fuel costs.
Russ Mould, AJ Bell’s investment director, 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 per cent 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.”
He added: “The board’s intention to maintain its stock market listing, if possible, also seems a bit odd. Liquidity in the shares could be awful as neither Fosun nor the lenders may want to sell until there is a considerable uplift in the valuation of the business, so why incur the expense of listing fees?
“One can only assume that keeping the listing effectively provides some reassurance to Fosun or, more likely, the lenders that they have an exit route in the future.
CMC Markets analyst Michael Hewson said: “While management have said that they intend to maintain the company’s listing they have conceded that there are circumstances that might see it cancelled. It would certainly be a brave investor who got involved now, given the scale of the challenges already facing the sector,” he said.
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