Thomas Cook Group is so deeply in debt its now too big to be allowed to fail, and the banks are being asked to stump up another £150m to tide it over the winter months. Despite its shares being worthless the banks are likely, reluctantly, to agree.
The reason they’ll do so is that Chinese leisure group Fosun, already a shareholder, is still negotiating a radical debt to equity plan that will dig the travel and airline group out of its debt hole permanently – but wipe out the existing shareholders who will get nothing.
The debt to equity swap will see £650m in bank debt repaid, and another $1.15 billion in bond debt paid off by Fosun for a controlling stake in the Group, and majority ownership of its airline assets.
Lufthansa had made a bid for the airline business but let it drop when Eurowings reported dire financial issues and it had to take swift remedial action.
The strategic review of Thomas Cook’s airline unit: Condor, Thomas Cook Airlines Balearics, Thomas Cook Airlines Scandinavia and Thomas Cook Airlines UK halted when the Fosun deal was announced in July. The carriers operate a fleet of around 100 aircraft, with revenue of £3.5 billion and a £129 million operating profit in 2018.
Despite revenue of £9.6 billion and a staff of some 21,000, Thomas Cook Group barely makes money. Margins are wafer thin and the market shrinking. It’s whole operating structure has become largely unprofitable, something Fosun wants to change.