Thomas Cook secures lenders deal

STRUGGLING tour operator Thomas Cook has reached a £1.4 billion deal with its lenders that will keep the firm afloat for the next three years in exchange for hefty fees.

Banks, led by Barclays and the Royal Bank of Scotland, have extended a range of loans to the travel firm until May 2015 and will share an up-front £14 million fee. They also exacted higher interest rates and favourable stock options that will allow them to buy up to 10 per cent of the company at 8p a share at any time during the term of the loans. That is already a huge discount to Friday’s 21p closing price for Thomas Cook, and could be even more profitable for the banks if management plans to turn the company around succeed.

The 170-year-old company, which has 1,300 shops, wants to sell £200m of assets over the next 18 months as part of plans to take a chunk out of its near £1bn debt mountain. It is also close to agreeing sale and leaseback of between 17 and 19 aircraft, the proceeds of which will be retained by the group.

Under the terms of the debt deal, the company will initially keep the proceeds of sales but it must hand over cash above £250m in two “sweeps” in 2013 and 2014, and will be fined if it does not pay down at least £100m each time.

The group has so far sold assets contributing to a £135m cut to its net debt, including most recently the disposal of its Explorers Hotel in France.

Chief executive Sam Weihagen said: “These actions are an important step in the journey to strengthen confidence and ensure that the Thomas Cook Group will continue to provide customers with wonderful travel experiences for years to come.”

The group has issued a number of profit warnings in the last year and also saw the exit of former chief executive Manny Fontenla-Novoa.

The company was plunged into crisis in November after it went back to its lenders to ask for an additional £100m lifeline, sparking fears of a collapse, but later secured £200m from its banks.

It has since unveiled a turnaround plan for the UK business, which includes focusing on fewer and better-quality hotels and a drive for more online bookings.

Thomson Holidays owner TUI Travel is expected to heap further pressure on its beleaguered rival Thomas Cook when it reports more strong trading tomorrow.

TUI has benefited from its rival’s woes, and was quick to capitalise by launching adverts saying: “Another holiday company may be experiencing turbulence, but we are in really great shape.”

TUI is expected to report narrower losses in the three months to the end of March, after an increase in the previous quarter when the Arab spring hit demand for holidays in the North Africa.