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Thomas Cook in £750m rescue deal talks Thomas Cook in £750m rescue deal talks
(about 1 hour later)
Troubled travel company Thomas Cook is in £750m rescue talks with banks and its largest shareholder, Fosun.Troubled travel company Thomas Cook is in £750m rescue talks with banks and its largest shareholder, Fosun.
The measures, which have not been finalised, would see the Chinese investor buy the firm's tour business.The measures, which have not been finalised, would see the Chinese investor buy the firm's tour business.
Thomas Cook's chief executive, Peter Fankhauser, said the proposal was "not the outcome any of us wanted" but insisted it was "pragmatic".Thomas Cook's chief executive, Peter Fankhauser, said the proposal was "not the outcome any of us wanted" but insisted it was "pragmatic".
He told the BBC that customers did not need to worry because their holiday bookings were "secure".He told the BBC that customers did not need to worry because their holiday bookings were "secure".
"They can book with us without worries," he said. "We have enough resources to operate our business so they can enjoy their holidays with us." Is my holiday safe?
The cash injection will give the group enough money to trade through to the end of next year and invest for the future. "They can book with us without worries," Mr Fankhauser said. "We have enough resources to operate our business so they can enjoy their holidays with us."
The travel agent launched a strategic review earlier this year but since then, it said, the European travel market has become "progressively more challenging". And this cash injection would give the group enough money to trade through to the end of next year and invest for the future, Thomas Cook said.
When store closures and cost-cutting measures were announced at the firm earlier this year, Thomas Cook said holidaymakers could have "complete confidence" because it is an ATOL-protected business.
Protection under the ATOL - or Air Travel Organiser's Licence - scheme means UK travellers on an air package holidays do not lose their money or become stranded abroad if a travel agent collapses.
It 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.
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 online competition. Last year, it also issued a number of profit warnings blaming a heatwave for a dip in summer holiday bookings.
It launched a strategic review in February, but since then, dwindling bookings and uncertainty surrounding Brexit have contributed to a deterioration in the market. In March, the firm announced plans to close 21 stores, costing more than 300 jobs, and in May, it revealed a £1.5bn half-year loss.
Thomas Cook said it was trying to combat those challenges with a "rigorous focus on cost" and by "delivering a stronger holiday offering to customers through high quality, higher-margin hotels".
The travel firm had already announced plans to slash costs, axing 150 roles from its head office in Peterborough, in the face of tough trading conditions and higher fuel expenses.
On Friday, Thomas Cook said the European travel market had become "progressively more challenging" as it painted a bleak picture for the second half of the year, blaming an "uncertain customer environment" for "intense competition".
That has hit the firm's finances and made it difficult to sell its airline or tour business to generate some cash.That has hit the firm's finances and made it difficult to sell its airline or tour 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 significant majority of the travel company's tour operator and a large minority stake in its airline if the deal goes ahead.As a result, the group has been forced to enter into talks with its banks and Fosun, which will own a significant majority of the travel company's tour operator and a large minority stake in its airline if the deal goes ahead.
Mr Fankhauser told the BBC's Today programme that "considering all options we had on the table" the deal was the "best available" choice. Is it a good deal?
Mr Fankhauser told the BBC's Today programme that "considering all options we had on the table", the deal was the "best available" choice.
Responding to a suggestion that the proposed deal was a last resort, he said: "This is a very good option to secure the business and to put the business on a solid financial foot for the future."Responding to a suggestion that the proposed deal was a last resort, he said: "This is a very good option to secure the business and to put the business on a solid financial foot for the future."
Earlier, in a statement issued by Thomas Cook, Mr Fankhauser said: "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, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.Earlier, in a statement issued by Thomas Cook, Mr Fankhauser said: "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, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.
"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.""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 about shareholders?
People who currently hold shares in the firm would see the value of their investment "significantly diluted" as a result of the proposed deal.People who currently hold shares in the firm would see the value of their investment "significantly diluted" as a result of the proposed deal.
The plans may even indicate a potential retreat from the stock market for Thomas Cook in a move that would see the world's oldest package holiday firm become a private company. "Basically, it's wipe out time" for shareholders, according to Markets.com analyst Neil Wilson.
'Intense competition' But Thomas Cook said existing shareholders may be given the option to reinvest in the firm, alongside Fosun, to become creditors.
Fosun said it had "extensive experience" in the global travel industry. The proposed rescue deal may even indicate a potential retreat from the stock market for Thomas Cook, in a move that would see the world's oldest package holiday firm become a private company.
"We are committed investors, with a proven track record of turning around iconic brands including ClubMed and Wolverhampton Wanderers FC," it said. Shares were trading down by about a third on Friday, at just under 9p apiece. The company's stock price has shed more than 90% of its value in the past year.
Thomas Cook said it was facing "intense competition" going into the second half of the year, blaming an "uncertain customer environment". What is Fosun?
The firm said it was trying to combat those challenges with a "rigorous focus on cost" and by "delivering a stronger holiday offering to customers through high quality, higher-margin hotels". Fosun is a £74.4bn Chinese investment giant that is listed on the Hong Kong stock exchange. The firm already has an 18% stake in Thomas Cook, but if this deal goes ahead, it would gain a "significant majority" of the firm.
The travel firm had already announced plans to slash costs, axing 150 roles from its head office in Peterborough, in the face of tough trading and higher fuel expenses. Fosun's portfolio of companies runs the gamut from insurers to football clubs. It says it operates in three major segments: "health, happiness and wealth".
Thomas Cook has been grappling with a decline in bookings and uncertainty surrounding Brexit, which it said contributed to the £1.5bn half-year loss that it reported in May. The investor said it had "extensive experience" in the global travel industry.
At the time, the firm hinted that it might close more stores, having already announced plans in March to shut 21 outlets and cut 320 retail jobs. "We are committed investors, with a proven track record of turning around iconic brands, including Club Med and Wolverhampton Wanderers FC," it said.
Shares in Thomas Cook have plunged by more than 80% over the past 12 months.