China’s Fosun has announced that it is in talks with Thomas Cook’s lending banks to pump £750 million in the travel operator’s business. This will lead to a further corporate reorganisation which will see Fosun own a controlling stake in Thomas Cook’s tour operator and also a minority interest in Thomas Cook’s airline.
According to media reports, a significant amount of Thomas Cook’s external bank and bond debt will be converted into equity. The company’s shareholders will also have their stakes diluted as a result of the recapitalisation.
According to media reports, the deal would see Fosun inject millions of pounds of new equity and debt into the Thomas Cook, the world’s oldest package holiday company.
If the deal is successfully completed, the recapitalisation will salvage the future of the 178 years old travel company. It is noteworthy that it won’t be the shareholders but the banks and hedge funds that hold the company’s distressed bonds who have the final say on the deal.
Recently, Thomas Cook’s business has taken a hit because of high debt, fading demand for its package holidays, and a hot 2018 summer in Europe. “After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing the board has decided to move forward with a plan to recapitalise the business,” Thomas Cook Chief Executive Peter Fankhauser told the media.
“While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution” he added. Thomas Cook recorded £7.4 billion in revenue from a customer base of 11 million in 2018, while its higher-margin airline made £3.5 billion in revenue.