Thomas Cook is rescued by £750m deal
Shareholders facing wipe-out Chinese offer £750m lifeline 22,000 jobs at risk
TROUBLED Thomas Cook reassured customers their holidays were safe yesterday after it secured extra cash.
The travel agent has been struggling for several months under the weight of a £1.2billion debt pile.
It was running out of money and feared it would not be able to survive but its lenders and major Chinese investment firm Fosun agreed to stump up £750million to keep the business running.
Reassuring customers, Thomas Cook boss Peter Fankhauser said: ‘They can book with us without worries. We have enough resources to operate our business so they can enjoy their holidays.’
However, its troubles throw the futures of its 22,000 employees into doubt, as Mr Fankhauser said he ‘can’t guarantee’ that their jobs will not be cut.
Thomas Cook operates a chain of 566 high street shops. The firm, founded in 1 41, has blamed last summer’s heatwave, which made many Britons stay at home, and an unexpected weakening in the popularity of Spain for its increasingly poor performance.
Thomas Cook’s parent company will be taken over by its lenders, who are swapping their debt for ownership.
THOMAS Cook is aiming to seal a last- ditch rescue deal with the Chinese that will saddle shareholders with massive losses and put 22,000 jobs at risk.
The struggling travel company is in advanced discussions with Shanghai-headquartered investment firm Fosun over a deal that will see it handed a £750m lifeline as it battles to survive the winter.
Boss Peter Fankhauser warned the firm’s 22,000 employees that he cannot guarantee their jobs are safe.
The chief executive – who has been paid £8.4m since he took charge in November 2014 while shares have fallen 89pc – was even forced to reassure panicked holidaymakers that their bookings will still go ahead.
And current shareholders, including the thousands of ordinary savers who own 20pc of Thomas Cook, will see their remaining investment almost totally wiped out.
Last night the stock crashed 59.5pc, or 7.89p, to an all-time low of 5.38p, with shares virtually worthless.
Fankhauser said: ‘The bitter pill is we have to disappoint our existing shareholders, who were very loyal to us over the last years. That is a disappointment for me personally.
‘None of us wanted to have this outcome, but it is a solution which is securing the future of the business.’
The rescue deal is a final humiliation for the once-mighty travel operator, which is fighting for survival in an ultra-tough market while weighed down by more than £1.2bn of debt.
It triggered an outpouring of worry on social media, with customers asking if their summer plans were now at risk.
In a highly unusual announcement, 58-year- old Fankhauser said: ‘ They can book with us, without worries.
‘We have enough resources to operate our business so they can enjoy their holidays with us.’
Existing shareholders face losing almost every penny under the terms of the rescue deal.
Lenders will take control of Thomas Cook’s stock marketlisted parent company as they swap their debt for shares.
The parent company will hold onto a majority stake in Thomas Cook’s more profitable airline business, but only a small chunk of its troubled travel operator arm. The lion’s share of that division will go to Fosun, which will also take a small part of the airline business as part of its investment.
Fosun, which also owns Wolverhampton Wanderers Football Club, already has an 18pc stake in Thomas Cook and will be desperate to minimise its own losses.
Thomas Cook expects some of the extra £750m to come from Fosun so it has extra cash to continue over the winter period, and some to come as new loans from its existing lenders, a group of major banks.
It is unclear whether Thomas Cook, which started life in 1841, will remain listed on the stock market when the deal completes in early October.
The TSSA travel workers’ union said it is seeking an urgent meeting with management and demanded a guarantee that jobs would be protected. Manuel Cortes, its general secretary, said: ‘Our members have been having a terrible time over the last few months with all the uncertainty surrounding the future of Thomas Cook and, of course, potentially their jobs.
‘We would resist any break-up of Thomas Cook which would be detrimental to jobs but also the High Street as a whole.’
Thomas Cook operates 566 High Street shops, after announcing plans in March to close 21 with the loss of 320 jobs.
It suffered a £163m loss last year, blaming its increasingly poor performance on a summer heatwave which made many Britons stay at home, and an unexpected weakening in the popularity of Spain.
As recently as last month, Thomas Cook was still talking about selling bits of its business. It had received an offer from Fosun for its travel operator arm, an approach for its Northern Europe business and a number of bids for its airline.
Thomas Cook has said its flights and holidays should be unaffected by the rescue deal.
But yesterday it admitted a further deterioration in its finances had impacted its ability to sell any of the parts ‘in a way which returns satisfactory value to the group and its stakeholders’.
Fankhauser said: ‘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.’