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Thomas Cook in £750m rescue deal talks

Written by: Emma Lunn
Tour operator Thomas Cook is in advanced discussions with its largest shareholder Fosun.

If a deal is agreed, it would mean Chinese investor Fosun and Thomas Cook’s lenders making a “substantial” capital investment in the company’s tour operator business, and taking a majority stake.

Under the proposal, Thomas Cook is targeting an injection of £750m of new money which would provide sufficient liquidity to trade over the winter 2019/20 season and the financial flexibility to invest in the business for the future.

The recapitalisation proposal would result in Fosun owning a significant controlling stake in Thomas Cook’s tour operator business and a significant minority interest in the group’s airline business.

Peter Fankhauser, chief executive of Thomas Cook, said: “While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees.”

What does the deal mean for Thomas Cook shareholders?

The price of Thomas Cook shares fell 36 per cent on the news of the proposed buyout. This time last year a share was worth about 106p – now the price is about 12p.

Graham Spooner, investment research analyst at The Share Centre, said: “The recapitalisation is also due to be supported by the group’s core lending banks, which would see existing shareholders have their stakes significantly diluted.

“There was also another poor trading update which showed first half trends have continued into the second half as a result of the European travel market becoming ‘progressively more challenging’. Increased competition has put pressure on margins especially in the UK, a reflection of the uncertain consumer environment. The group now expects underlying earnings to be lower than the same period last year. The share price, which has collapsed over the last year, is down a further 36 per cent on this news.”

Will my holiday go ahead?

The rescue talks aren’t a big surprise – Thomas Cook shut some stores and announced cost-cutting measures earlier this year. It reported a pre-tax loss of £1.5bn in May after last summer’s heatwave saw less Brits heading abroad for their summer holiday.

Fankhauser said the cash injection would give the company enough money to trade through to the end of next year and invest for the future.

All package holidays benefit from ATOL protection. This means you are guaranteed a refund if your travel company goes bust and the scheme also makes sure customers don’t get stranded abroad.

ATOL protection also covers many charter flights and means that, if the operator collapses while people are away, they can finish their holiday and be flown home at no extra cost.

If you’re yet to book a holiday, it could be a good time to bag a bargain. Thomas Cook is offering discounts of up to £300 on selected holidays.

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