Shares of troubled travel operator Thomas Cook have slumped after it said it was seeking to raise another £150m from investors, shortly after already asking for £750m, in a bid to stave off a Christmas cash crunch. Thomas Cook said it was in advanced discussions with its banks and Fosun, the Chinese conglomerate and its biggest shareholder, over the "substantial new capital investment."
The travel company has struggled in recent years due to a large debt pile, intense competition and structural change to a travel industry lumbered with large branch networks. In recent months, unseasonable weather and the impact of Brexit on consumers' travel plans have added to its woes, pushing it to a £1.5bn loss for the six months to March 31.
Shares of the firm fell by a fifth on Monday to 6.2p amid questions of whether the company would survive. The price was a far cry from highs of 140p reached as recently as May 2018. The former FTSE 100 blue chip company was worth only £147.9m before the latest fall in its value. The latest cash injection comes a month after Thomas Cook revealed it was in talks over a £759m rescue deal with Fosun, a Shanghai-based company with diverse interests that include Wolverhampton Wanderers football club, insurance and property businesses and the Club Med tourism brand.
Thomas Cook said the extra £150m would provide it with liquidity headroom during the winter months, when travel operators generally ran low on cash after bulk buying hotel space before a surge of bookings for the next summer. It expects the bailout to be concluded in early October. Those shareholders who have remained with Thomas Cook are expected to have the value of their shares "significantly diluted" by the bailout. The investors included Marathon Asset Management, Jupiter Asset Management, and Neset Kockar, a Turkishh tourism entrepreneur.
Under the terms of the deal, about £1.7bn in debt will be converted to equity alongside the £900m cash injection, in order to help pay down the company's £1.2bn in net debt reported at the end of March. The plans would also involve splitting its profitable airline from the tour operator business, which Fosun would essentially take over. They would then have to decide on any reorganisation, prompting concern about the future of the 21,000-member workforce. The company has 563 high street branches in the UK.
