Thomas Cook is near finalising a £1.2 billion refinancing agreement that will give the company another two years of breathing room to turn its business around.

A group of 17 banks that includes Barclays and Royal Bank of Scotland is anticipated to approve loan extensions until 2015. The deal is seen as good news by the travel company even though the conditions of the deal are likely more stringent – higher interest rates and a significant stake of the business being taken by the lenders. However, the tour operator would have had to repay most of its debt by April next year if the banks hadn’t backed the deal.

Thomas Cook, the best-known and oldest travel group in the UK, looked like it was on the edge of collapse before Christmas following a tough year, during which it issued three profit warnings and its long-time chief executive resigned. Although £100 million of short-term funding was secured in autumn last year, an emergency £200 million loan was needed by late November so the firm didn’t go belly up. In the following months, bookings declined as customers were deterred by reports of the financial trouble.

This new financial deal has been negotiated by interim chief executive Sam Weihagen. It’s likely to be followed with another sale of assets to help pay off the group’s debt. The company sold Iberostar, its Spanish hotel chain, last year. It’s now looking to sell its Indian unit completely, despite Weihagen previous saying that he would only take an attractive offer for the growing holiday business in India. The tour operator, which has 30,000 workers and a £9 billion annual turnover, may also lease back and sell its fleet

of aircraft. It’s stake in air traffic controller Nats, which is part-owned with six other carriers in the Airlines Group, is another asset the company could sell.


The travel group said on Monday that it’s in advanced negotiations with its banking consortium. These talks are part of the result of a strategic review undertaken by the company since agreeing terms of a new facility last November. Along with revised financial arrangements, the asset disposal programme, and sale of Thomas Cook India, they are exploring a possible leaseback and sale of certain planes.

In addition to these measures, Thomas Cook is axing 200 of its 1,300 staff at high-street stores in the UK. Since shares in the company fell 75% in one day last November, they have recovered from 10p to 20.5p. The company has recently announced a 2% decline in summer bookings throughout Britain, but says new business has been brought in with its new Wonderful World advertising campaign, while updates to its websites have seen a 19% rise in online bookings over recent weeks.

Weihagen said last month in a statement that trading for the group was stable and in line with expectations. The outlook for the company is still challenging, mainly due to lower demand and a particular slump in the French market. However, bookings for much of Europe have improved and summer trading is encouraging, he added. The tour operator also said it’s seeing British holidaymakers booking Tunisia trips after bookings fell with the Arab spring. However, its German consumers have largely boycotted Greece since the bailouts and Euro crisis.

Source Kusadası Observer

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