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Published on Friday, September 13, 2019

Thomas Cook warns of possible collapse as it asks lenders for an extra £100 million


Thomas Cook has reportedly asked lenders for a further £100 million in addition to the £900 million already on the table.

And it has warned that if it doesn't manage to finalise a deal this month, it faces insolvency.

Sky News is reporting that talks between Thomas Cook and its financial stakeholders resulted in the request for more capital to be made available to the company than the £900 million proposed last month.

A City source said Thomas Cook thought it unlikely it would need to draw on the additional £100 million, but the extra funding is needed to reassure investors.

Meanwhile, in a court filing on August 30, which Sky News claims to have seen, Thomas Cook warned that it was running out of time to secure its future.

"The serious liquidity issues within the group have led to an urgent need to complete any restructuring within September," it said.

"[Any] delay would make it impossible to implement a restructuring transaction within September, and the Scheme Companies would be likely to run out of money and enter into formal insolvency proceedings."

Cook's board has been meeting this week to try to agree on the restructure before a stakeholder vote next week.

Sky News said sources told it yesterday that the deal looked 'harder and more complicated than it did a few days ago'.

Under the terms of the rescue plan on the table, Thomas Cook's Chinese investor Fosun will inject £450m of new money into the company in return for 75% of its tour operating business and not more than 25% of its airline.

EU ownership rules prohibit Fosun from taking a controlling stake in the' airline.

Lending banks and bondholders would contribute £450 million in aggregate and write off £1.7 billion in existing debt in exchange for the remaining stakes in the two divisions.

However, hedge funds that hold credit insurance on the travel group are threatening to derail the deal, according to Bloomberg.

It claimed hedge funds including Sona Asset Management and XAIA Investment might vote against the rescue deal at next week's creditor meeting.

Credit insurance pays out in the event of a default, but the hedge funds are concerned that the proposed debt-for-equity swap element of the restructuring would leave their holdings with no debt to insure, preventing them from receiving a payout.

Why does Thomas Cook need a deal this month?
Thomas Cook needs to convince the CAA of its solvency in order to renew its ATOL licence by the authority's September 30 deadline. Also, according to Sky, it needs new money by early October to pay key suppliers.

What the Mole says:
Fosun appears committed to Thomas Cook, which it views as a platform for its proposed expansion into Europe, however whether it is committed enough to sink more money into a company it has been propping up for four years remains to be seen. Nevertheless, Turkish investor Neset Kockar has recently shown an interest in Thomas Cook, buying 8% of its shares last month and the travel industry entrepreneur has expressed an interest in playing a role in its rescue plan.

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