Thomas Cook Group in £750m rescue deal talks with Fosun and banks

Fosun Holiday Group and Thomas Cook Group logos 8893893893Thomas Cook Group plc announced that it is in discussions with Fosun Tourism Group, its largest shareholder, and core lenders regarding a significant new capital investment. The investment would be part of Thomas Cook Group’s (Group’s) recapitalisation and separation from the group.

Thomas Cook Group plc is a London-based global travel business. The company was formed in June 2007 after the merger of MyTravel Group plc and Thomas Cook AG.

Fosun Tourism Group is a Chinese leisure tourism resorts group. It is the largest group of its kind in the world.

In a press release, Thomas Cook Group wrote:

“Under the proposal, the Group is targeting an injection of £750 million of new money which would provide sufficient liquidity to trade over the Winter 2019/20 season and the financial flexibility to invest in the business for the future.”

“At completion, the new money would comprise a capital injection and new financing facilities.”

Fosun will have more control

If the current talks become reality, Fosun will be a majority shareholder of the Group Tour Operator and a significant minority shareholder in the Group Airline.

Much of its current bond and external bank debt will be converted into equity, Thomas Cook added. Its core lenders support the current recapitalisation plans and are discussing terms with Thomas Cook. The recapitalisation won’t affect trade creditors, the company says.

Current shareholders will be considerably diluted if the recapitalisation goes through. Shareholders, however, may be able to take part in the recapitalisation by investing alongside Fosun.

Thomas Cook added:

“This announcement results from the strategic review of the Group Airline announced in February 2019, and subsequent approaches for the Tour Operator.”

“Since commencing the review, the operating environment in the European travel market has become progressively more challenging.”

“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.”

In the best interests of stakeholders

Thomas Cook’s Board concludes that it is in the stakeholders’ best interests to go ahead with a full recapitalisation of the Group, plus new investment into the company.

The Group Airline’s strategic review has been paused. The company wants to see what the outcome of the recapitalisation is before reviewing the Group Airline.

Thomas Cook’s CEO, Peter Fankhauser, said:

“After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the Board has decided to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.”

“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.”

Online competition

Thomas Cook, along with thousands of other companies across the world, has struggled to maintain a presence on the High Street. Companies that have not adaptly rapidly to online shopping are in trouble today. In fact, many have disappeared.

Online travel giants like Expedia Group and Booking.com have gained market share rapidly over the past twenty years. Most of the biggest ones today, including Expedia and Booking.com, did not exist before the 1990s.