Thomas Cook in £ 750 million bailout talks
Troubled travel company Thomas Cook is in rescue talks for £ 750 million with banks and its main shareholder, Fosun.
The measures, which have not been completed, would see the Chinese investor buy the company’s travel business.
The executive director of Thomas Cook, Peter Fankhauser, said the proposal “was not the result that none of us wanted,” but insisted it was “pragmatic.”
He told the BBC that customers did not have to worry because their vacation reservations were “safe.”
Are my vacations safe?
“They can book with us without worries,” said Fankhauser. “We have enough resources to operate our business so they can enjoy their vacations with us.”
And this cash injection would give the group enough money to negotiate until the end of next year and invest for the future, said Thomas Cook.
When the closing of the store was announced and the measures of reduction of costs in the firm at the beginning of this year, Thomas Cook said that the tourists could have “total confidence” because it is a business protected by ATOL.
Protection under the ATOL scheme, or the Air Travel Organizer License, means that travelers in the United Kingdom in an air package do not lose their money or get stranded abroad if a travel agent collapses.
It also covers many charter flights and means that if the operator collapses while people are absent, they can finish their vacation and fly home at no additional cost. Why does Thomas Cook need the money?
The travel agent has found it difficult to maintain a presence on the High Street in the face of increased competition online. Last year, it also issued a series of profit warnings blaming a heat wave for a fall in summer vacation reservations.
It launched a strategic review in February, but since then, the decline in reserves and the uncertainty surrounding Brexit have contributed to a deterioration of the market. In March, the firm announced plans to close 21 stores, with a cost of more than 300 jobs, and in May, it revealed a half-year loss of £ 1.5bn.
Thomas Cook said he was trying to combat those challenges with a “rigorous approach to cost” and “to offer a stronger vacation offer to customers through high-quality hotels with a higher margin.”
The travel company, which has 9,000 employees in the United Kingdom, had already announced plans to reduce costs, eliminating 150 positions from its headquarters in Peterborough, given the difficult business conditions and higher fuel costs.
On Friday, Thomas Cook said the European travel market had become “increasingly challenging,” as it painted a bleak picture for the second half of the year, blaming an “uncertain client environment” for “intense competition.”
That affected the company’s finances and hindered the sale of its airline or travel business to generate some cash.
As a result, the group has been forced to enter into talks with its banks and Fosun, which will own a large majority of the tour operator of the travel company and a large minority stake in its airline if the agreement continues.
It’s a good deal?
Mr. Fankhauser told the BBC Today program that “considering all the options we had on the table”, the agreement was the “best available” option.
Responding to a suggestion that the proposed agreement was a last resort, he said: “This is a very good option to secure the business and put the business on a sound financial footing for the future.”
Earlier, in a statement issued by Thomas Cook, Mr. Fankhauser said: “While this is not the result that any of us desired for our shareholders, this proposal is a pragmatic and responsible solution that provides the means to secure the future of the Thomas Cook’s business for our customers, our suppliers and our employees. ”
What happens with the shareholders?
Thomas Cook said that people who currently hold shares in the firm would see the value of their investment “significantly diluted” as a result of the proposed agreement.
“Basically, it’s time to erase” for shareholders, according to Markets.com analyst Neil Wilson.
But Thomas Cook said existing shareholders can be given the option to reinvest in the firm, along with Fosun, to become creditors.
The proposed rescue agreement may even indicate a possible withdrawal from the stock market for Thomas Cook, in a move that would make the world’s oldest vacation package company a private company.
Stocks traded down about a third on Friday, to just under 9 pence each. The price of the company’s shares has lost more than 90% of its value in the last year.
What is Fosun?
Fosun is a Chinese investment giant of 74,400 million pounds listed on the Hong Kong stock exchange. The firm already has an 18% stake in Thomas Cook, but if this agreement goes ahead, it would get a “significant majority” from the firm.
Fosun’s portfolio of companies ranges from insurers to soccer clubs. It says it operates in three main segments: “health, happiness and wealth.”
The investor said he had “extensive experience” in the global travel industry.
“We are committed investors, with a proven track record of turning to iconic brands such as Club Med and Wolverhampton Wanderers FC,” he said.