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Thomas Cook shares dive on news of bank talks Thomas Cook shares dive on news of bank talks
(about 1 hour later)
Shares in Thomas Cook have opened down 62% after it announced it was in talks with banks about increasing the amount of money it can borrow. Shares in Thomas Cook have fallen more 75% after it announced it was in talks with banks about increasing the amount of money it can borrow.
The travel firm said it had seen a "deterioration of trading in some areas of the business".The travel firm said it had seen a "deterioration of trading in some areas of the business".
It also said it would delay releasing its full year results until it had concluded the discussions.It also said it would delay releasing its full year results until it had concluded the discussions.
Thomas Cook has had particular problems with political unrest in Egypt and Tunisia and floods in Thailand.
Last month, Thomas Cook announced it had arranged a new £100m credit agreement with its bankers.Last month, Thomas Cook announced it had arranged a new £100m credit agreement with its bankers.
The company is trying to negotiate about another £100m credit.
It said that while the last loan had taken four to six weeks to arrange, there was greater urgency this time and it was confident of being significantly quicker this time.
The company has stressed that it is not currently in breach of the terms of any of its loans, but that it wanted to "improve its resilience if trading conditions remain difficult".The company has stressed that it is not currently in breach of the terms of any of its loans, but that it wanted to "improve its resilience if trading conditions remain difficult".
It said last month that the terms of an existing £150m loan and an £850m credit facility have been amended to help cashflow. Thomas Cook said last month that the terms of an existing £150m loan and an £850m credit facility have been amended to help cashflow.
The firm, which issued three profit warnings this year, has struggled with a slump in bookings following unrest in the Arab world. 'Not travelling'
In May, it revealed that it lost £22m after cancelling 160,000 holidays to Egypt and Tunisia as a result of the countries' political unrest. In a conference call, Thomas Cook chief executive Sam Weihagen reassured customers that it was business as usual.
"We have all the protection in place as any other travel company and they should not worry," he said.
While Thomas Cook's announcement is worrying for investors, there is no need for holidaymakers to share the same level of concern.
Anyone booked for an overseas package holiday with Thomas Cook is covered under the Air Travel Organisers' Licensing (Atol) scheme.
This means that even in the worst case scenario - that the company goes bust when holidaymakers are away - customers on package deals are flown home without incurring extra expense. Those who have not already left for their holiday are refunded.
Holiday bookings should also be honoured if there is a takeover.
But, at present, with Thomas Cook in talks with banks, customers need not do anything, and the company has urged those with bookings not to worry.
However, people who have only booked a flight with the company will not be covered by the Atol scheme and are advised to buy suitable travel insurance.
Anyone booked for a package holiday with Thomas Cook is covered under the Air Travel Organisers' Licensing (Atol) scheme.
However, people who have only booked a flight with the company will not be covered by the Atol scheme and are advised to buy suitable travel insurance.
Mr Weihagen explained that trading had been particularly poor in France and Belgium, where bookings are down 20% compared with last year, and in Thomas Cook's Russian business.
"Winter travellers from Russia go to Thailand or Egypt," he said, adding that the floods in Thailand and continuing political unrest in Egypt had hit those bookings.
The biggest destination for French travellers in winter is Tunisia, which means that "the French people are simply not travelling".
He said that the trading position in the UK was "tough, but not of the same magnitude".
Thomas Cook shares have fallen 95% from their high for the year of 205p per share recorded in January.
It has been a tough year for travel companies generally. Thomas Cook's rival Tui's shares have fallen 68% from their high for the year, including a further 5.6% fall following Thomas Cook's announcement on Tuesday.