A consortium of 17 banks including Royal Bank of Scotland and Barclays is expected to approve an extension of loans until 2015. Although the conditions are likely to be stringent, with higher interest rates and the lenders taking a significant stake in the company, the deal is regarded as good news by Thomas Cook.
Without the backing of the banks, it would have had to repay the bulk of its debt by April 2013.
Britain’s oldest and best-known tour operator appeared to be on the brink of collapse before Christmas after a disastrous year that featured three profit warnings and the departure of its long-serving chief executive. Despite £100m of short-term funding having been secured in autumn 2011, an emergency loan of £200m was needed by late November to keep the firm afloat. Bookings slumped in subsequent months as reports of its financial woes deterred customers.
The new arrangement negotiated by the interim chief executive, Sam Weihagen, is likely to be followed by further asset sales to help pay off the debt of the 170-year-old firm, which has an annual turnover of £9bn and 30,000 employees.
Last year it sold off its Spanish hotel chain to Iberostar and it is looking to sell its Indian division entirely, although Weihagen has said he would take only a “compelling offer” for the growing Indian holiday business. Its fleet of planes may also be sold and leased back.
Another asset that could be sold is its stake in Nats, the air traffic controller. The shareholding is part-owned with six other airlines in the Airlines Group, which is considering whether to sell its investment.
The firm is also axing 200 of its 1,300 UK high-street stores. Thomas Cook shares tumbled by more than 75% to less than 10p on one tumultuous day in November last year, but have since recovered to 20.5p. It recently announced a 2% fall in summer bookings in Britain, but said a new “Wonderful World” advertising campaign had brought in new business, while improvements to its websites had meant a 19% increase in online bookings in recent weeks.
In a statement last month, Weihagen said trading across the group was “stable” and in line with expectations.
He said the outlook for the business remained challenging, with a major factor being lower consumer demand, and the French market in particular slumping. However, he said bookings across much of Europe had improved and summer trading was “encouraging”.
The company says it is now seeing British holidaymakers return to Tunisia after a drop in bookings since the Arab spring – although its German clientele have largely boycotted Greece since the Euro crisis and bailouts.