THOMAS Cook has confirmed it is in advanced discussions with bond holders for a £150m cash injection, on top of the £750m rescue deal it is already working on with lead investor Fosun, which would nearly wipe out its existing shareholders.
The company's market value dropped 18.3 per cent yesterday. Shares were valued at just 7.9p after the announcement, having started 2019 at 33p.
The money will help the embattled travel giant stay afloat over the quieter winter period.
Last month, the 178-year-old tour operator began talks with Fosun for a £750m rescue that would give the Chinese conglomerate control over the firm's package tour business.
Yesterday, Thomas Cook said it had made significant progress towards finalising the agreement.
The Fosun deal would involve the Chinese firm, plus Thomas Cook's banks and bondholders, converting a large chunk of the travel firm's £650m bank debt and €1.15bn (£1.1bn) bond debt into equity.
Existing shareholders are "expected to be significantly diluted" as a result of the deal.
Thomas Cook said it hopes to go ahead with the recapitalisation in October.
Analyst at CMC Markets David Madden said: "The company can't seem to get a handle of its finances, and the timing isn't great given that some people are curtailing non-essential expenditure such as travel."
In a statement, the firm told markets: "Thomas Cook has made significant progress towards finalising the key transaction terms of the recapitalisation with Fosun, the group's core lending banks and subsequently with noteholders representing approximately 50 per cent of the company's 2022 and 2023 senior notes.
"This additional capital will provide further liquidity headroom through the coming 2019/20 winter cash low period."
(c) 2019 City A.M., source Newspaper