Thomas Cook secures 100m lifeline

Troubled tour operator given last-minute lending extension by its banks after three days of emergency talks

Debt-laden tour operator Thomas Cook secured a new deal with its lending banks late on Friday night, following three days of emergency talks to avert a winter debt crisis. The deal should remove highly damaging doubts about the company's future solvency.

An additional 100m extension to existing borrowing facilities is expected to remove immediate concerns prospective customers may have over Thomas Cook's future. However, the deal is unlikely to be the last word in longer term discussions with shareholders and lenders over the group's colossal debt burden. A more radical solution to the tour operator's borrowings is expected to be sought.

On Friday night Thomas Cook said the emergency deal "significantly improves the robustness of the group's financial position". It added that it was taking "steps to reduce the group's debt and reach a more appropriate capital structure over time".

Alongside the extended borrowing facility, Thomas Cook has secured a further loosening to the terms of a critical loan covenant test which it risked failing at the end of next month. The group's net debt which, in common with all tour operators', fluctuates throughout the year is expected to peak at the end of December at about 1.5bn.

An initial 100m loan extension and a lighter covenant test were agreed only five weeks ago. However, recent poor booking rates in France and Belgium forced the tour operator to return to its lenders cap in hand. Some 17 banks led by Barclays, HSBC and Unicredit were as anxious as Thomas Cook's management to secure a deal as quickly as possible in the hope of resolving the tour operator's crisis before uncertainty over its finances began to affect customer bookings and damaged its relationships with hotels and airlines.

Yesterday, rival group Tui Travel, which controls the Thomson and First Choice brands, took out full-page adverts in the! nationa l press saying "another holiday company may be experiencing turbulence, but we're in really great shape".

This week Thomas Cook shares slumped by 75% after the shock announcement for the second time in a month that the business needed a further 100m to ensure it could stay within loan agreements.

The warning prompted Thomas Cook to postpone its full-year results and much-awaited restructuring plans for the troublesome UK business.

The results will now be published in three weeks' time.


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