Thomas Cook enlists China's Fosun to salvage oldest travel firm

Darnell Taylor
July 14, 2019

The funds would enable Thomas Cook to continue trading over the winter, as well as giving it some room to invest in the business, it said.

It also means that if Thomas Cook started paying dividends again in future, as unlikely as it may seem at this point, existing shareholders would get a lower proportionate share of any such dividend.

"We are committed investors, with a proven track record of turning around iconic brands including ClubMed and Wolverhampton Wanderers FC".

If a deal is struck Thomas Cook will have to let Fosun take the reins, but cultural clashes due to business norms or an overriding strategy could mean the deal causes more problems than it solves.

"While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution".

The world's oldest travel company, which has been hit by fading demand for its package holidays, high debt and a hot 2018 summer in Europe, has also been weighing approaches for its airline business and Nordic operations.

A statement from Thomas Cook said: "The proposal envisages that a significant amount of the group's external bank and bond debt will be converted into equity, to be agreed following discussions with financial creditors".

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Fankhauser said the sale of the airline business was paused while Thomas Cook focused on the refinancing, adding it was "too early to speculate on what will happen on the airline review".

On Friday, Thomas Cook stunned the market when it unveiled a debt-for-equity swap deal that would see conglomerate Fosun and its lending banks inject £750 million into the business to stave off a collapse.

The travel group now has debts of £1.25bn compared to a market value last night of about £204mln.

It is one of China's so-called "grey rhino" companies - along with Wanda, HNA and Anbang - that have come under growing scrutiny in the last few years from mainland authorities wanting to crack down on debt-fuelled foreign acquisitions.

Thomas Cook said summer bookings in its tour operations business were down 9 per cent, while those at its airline business are down 3 per cent, likely leading to operating profit in the second half of the year coming in lower than the year-ago period.

The 178-year-old London-listed company, worth roughly $4 billion after it debuted in June 2007, now has a market value of about $255m and has seen its stock more than halve in value so far this year. Its higher-margin airline business - which includes German holiday carrier Condor - had revenue of £3.5 billion.

"Fosun is hoping that Thomas Cook's brand name and global reach will expand its business among wealthy Chinese tourists", Orient Capital Research managing director Andrew Collier told Bloomberg News.

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