Shares in troubled travel group Thomas Cook (TCG) could become worthless after the firm agreed a refinancing deal with its lenders and Chinese private equity group Fosun.
As part of the agreement announced today, Fosun will put in £450m of new money and own at least 75% of the group’s tour operating business in return. It will also get 25% ownership of its airline.
The banks already lending Thomas Cook money will also chip in another £450m, and convert a lot of the company’s £1bn plus debt pile into shares.
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It means that in return they’ll get the other 75% of the airline, and up to 25% of the tour operator.
If all goes to plan, the deal will be implemented in early October this year.
NOTHING LEFT FOR LOYAL SHAREHOLDERS
The agreement is good news for holidaymakers currently jetting off as the kids go back to school, with their holidays remaining fully protected despite Thomas Cook’s woes.
But for those holding shares in the company, it’s a different story altogether with barely anything left on the table.
It explains why the firm’s share price has plunged another 15% today to 6p, a staggering drop from the 81p the shares were worth a year ago.
Chief executive Peter Fankhauser admitted to Sky News the deal will be a ‘bitter pill’ to swallow for loyal investors.
Despite Fosun and Thomas Cook’s lenders owning virtually all of the company, the firm plans to retain its stock market listing, but also concedes this may not turn out to be the case.
INVESTORS ‘CASHING OUT’
Russ Mould, investment director at AJ Bell, explains, ‘Investors are simply trying to cash out and crystallise any value left in their investment before the refinancing, for fear there could be nothing left if they wait.
‘The board’s intention to maintain its stock market listing, if possible, also seems a bit odd.
‘Liquidity in the shares could be awful as neither Fosun nor the lenders may want to sell until there is a considerable uplift in the valuation of the business, so why incur the expense of listing fees?
‘One can only assume that keeping the listing effectively provides some reassurance to Fosun or, more likely, the lenders that they have an exit route in the future.’
