Thomas Cook remained defiant about its long-term future yesterday, despite its share price plummeting by 75 per cent after it warned of "deterioration" in its recent trading and its "cash and liquidity position".
But analysts questioned whether the beleaguered tour operator, which has net debts of £900m, could survive in the long-term and if there was any value left in its equity.
Nick Batram, an analyst at Peel Hunt, slashed his target price for the company's shares from 55p to just 1p, saying: "Thomas Cook is clearly in a precarious financial position."
He said he expected the business to survive its current turmoil with support from banks, but he raised the prospect of a £700m recapitalisation of its balance sheet that might include a rights issue. Thomas Cook has been forced back into talks with its banks – a syndicate of 17 lenders including HSBC, Barclays and Italy's Unicredit – to secure "additional liquidity" during a seasonal low-point for cash levels. However, it stressed that it "remains in compliance with its financing covenants".
Thomas Cook only renegotiated its banking facilities at the end of last month, as well as securing a further £100m of headroom on its covenants. The group has also delayed publication of its full-year results, originally scheduled for tomorrow.
Shares in Thomas Cook fell 30.91p, or 75.2 per cent, to 10.2p yesterday. The trading update also dragged down its better-performing rival Tui Travel, which owns Thomson Holidays, by more than 9 per cent to 136.7p.
Thomas Cook has previously blamed a downturn in UK consumer spending and the unrest in the Middle East and North Africa for its three profits warnings this year. These led to the departure of its chief executive, Manny Fontenla-Novoa, in August.
Yesterday it said it had suffered this quarter from a fall of up to 20 per cent in bookings from French and Belgian travellers, particularly to Egypt. Its Russian joint venture has also been hurt by a fall in reservations to Egypt and flood-hit Thailand.