Thomas Cook agrees terms of £900m rescue deal

Embattled travel company Thomas Cook said on Wednesday that it has agreed the main terms of a £900m rescue deal but warned that it would "significantly" dilute shareholders' stakes and could lead to a de-listing.

As part of the deal, China's Fosun - its largest shareholder - will take a 75% stake in the tour operating business and a 25% stake in Thomas Cook's airline for £450m. Meanwhile, the company's core lending banks and noteholders will shell out £450m for a 75% stake in the airline and a 25% share of the tour operator.

The recapitalisation is expected to result in existing shareholders' interests being "significantly diluted", the company said.

"The board continues to proceed on the basis that a recapitalisation, achieved with the support of shareholders, is the preferred means of securing the future of the group for all its stakeholders (including customers, suppliers and employees), while at the same time enabling the existing shareholders to continue to retain an investment in the company," it said.

Thomas Cook said it intends to keep the company's main listing but also conceded that the implementation of the proposed recapitalisation could result in its cancellation.

At 1233 BST, the shares were down 12% at 6.22p.

Russ Mould, investment director at AJ Bell, said: "Shareholders in the troubled travel company may have to accept that their investment could be worthless.

"An update on its refinancing reveals that Chinese group Fosun and Thomas Cook’s lenders are going to get the lion’s share of the equity, meaning very little - if anything - is left on the table for the other shareholders.

"That would explain why the shares have fallen another 14% on the latest news. Investors are simply trying to cash out and crystallise any value left in their investment before the refinancing, for fear there could be nothing left if they wait.

"The board’s intention to maintain its stock market listing, if possible, also seems a bit odd. Liquidity in the shares could be awful as neither Fosun nor the lenders may want to sell until there is a considerable uplift in the valuation of the business, so why incur the expense of listing fees?

"One can only assume that keeping the listing effectively provides some reassurance to Fosun or, more likely, the lenders that they have an exit route in the future."

CMC Markets analyst Michael Hewson said: "It would certainly be a brave investor who got involved now, given the scale of the challenges already facing the sector."