Leisure firm Thomas Cook Group is reluctantly holding discussions with its largest shareholder, as well as banks, over the terms of a recapitalisation amounting to £750 million ($926 million).
It says the "advanced" talks with shareholder Fosun Tourism Group would require restructuring of the ownership of the tour operator and airline businesses of the company.
Much of the external bank and bond debt would be converted into equity under the proposition.
Fosun would hold a "significant" controlling stake in the tour operator as well as a "significant" minority interest in the airline, says Thomas Cook.
"While this is not the outcome any of us wanted for our shareholders," says chief executive Peter Fankhauser, "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."
Thomas Cook recently carried out a strategic review of the airline and disclosed that it had received approaches for the tour business. But it says the situation has become more complicated.
"Since commencing the review, the operating environment in the European travel market has become progressively more challenging," it says.
"This has impacted the group's underlying financial position and its ability to execute a disposal of the airline or the tour operator, either in whole or parts, in a way which returns satisfactory value to the group and its stakeholders."
Recapitalisation is the best option for the group's shareholders, the company argues, and it has temporarily suspended the strategic review of the airline.
It adds that the new capital is intended to provide "sufficient liquidity" for the upcoming winter season, as well as the resources to invest in the business.
Current shareholders' interests would be "significantly diluted" as a result, says the company, but may be given an opportunity to participate in the recapitalisation alongside Fosun.
"The group's core lending banks are supportive of a recapitalisation and are engaged in constructive discussions with the group to agree terms," says Thomas Cook. "The proposed recapitalisation will not impact trade creditors."
Recapitalisation would replace a £300 million funding facility agreed in May, but the proposal remains subject to several conditions including due diligence, agreements with stakeholders, and performance criteria, as well as regulatory approval.
Source: Cirium Dashboard
