£1.6bn refinancing lifts the debt cloud for Thomas Cook


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The Independent Online

Travel giant Thomas Cook today took a huge step towards recovery with a £1.6 billion refinancing of its vast debt pile, just 18 months after the 172-year old company veered close to collapse.

Chief executive Harriet Green, who took over last July to steer the travel agent’s turnaround, said the group had successfully avoided a “wall of debt” looming in 2015 when about £1.5 billion in outstanding debts  fall due.

Meanwhile, the City is picking up a £74 million fees bonanza from the reshaping of Cook’s balance sheet as the company raises £425 million through a share placing and rights issue, £441 million in bonds and £691 million in new banking facilities. 

Green, who also raised the prospect of a return to dividend payouts in 2015, said: “It will increase our financial headroom and flexibility  by removing the wall of debt that  we faced.”

Thomas Cook, which always has to borrow more in the winter, said the fundraising will reduce its average £788 million debt last year by more than half.

The City also lapped up better news on trading today as the shares jumped 11.7p, or 8 per cent, to 156.4p — more than 36p above the theoretical ex-rights price.

The shares sank as low as 10p in November 2011 when the company was forced to raise emergency funds from banks as the business was hit by a weak economy, floods in Thailand and unrest in Egypt.

Green cut 2500 jobs in the UK business earlier this year, and is looking to raise up to £150 million from sells-offs.

She is making faster-than-expected progress on cost savings and profit improvement, raising its target by £40 million to £390 million by 2015. Losses narrowed to £197.5 million in the six months to March 31, from £248.1 million last year.

The firm has already sold 60 per cent of its planned holidays for the summer season, meaning it will have 10% less left to sell in the discounted “lates market”.

Numis analyst Wyn Ellis said: “The rights and refinancing considerably de-risks the business in our view, but there is a lot of hard work to be done before the group fully rehabilitates itself.”

Joint brokers Credit Suisse and Jefferies Hoare Govett are underwriting the placing and rights issue with Barclays and BNP Paribas. Credit Suisse, RBS, Société Générale and BNP Paribas are underwriting the bonds.

Thomas Cook’s banks include Lloyds, Barclays and BNP Paribas.