MyTravel cuts losses and shrugs off creditor's appeal

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The Independent Online

The chief executive of MyTravel was adamant yesterday that the tour operator would force through a rescue restructuring despite the threat of further legal action from its bondholders.

The chief executive of MyTravel was adamant yesterday that the tour operator would force through a rescue restructuring despite the threat of further legal action from its bondholders.

Peter McHugh, who was speaking as the company unveiled sharply lower losses, said: "The law and the facts are on our side. The judge has decided against them [the bondholders] on all the real issues with regard to the restructuring."

But the holders of £216m of subordinated convertible bonds have the right to put their case that MyTravel has no right to implement a £800m debt-for-equity swap without their consent at a High Court hearing on Monday. Bondholders were last night examining the possibility of suing the company should MyTravel succeed in transferring its assets to a new company.

Mr McHugh, who will receive a £2m bonus if the restructuring goes ahead, expects the restructuring to be complete by the end of the year. He said: "Everything would lead us to believe that we are going to be successful on the 20th."

MyTravel yesterday posted pre-tax losses for the 13 months to 31 October of £190.3m, down from £910.9m the previous year. It made an operating profit before exceptional items and goodwill of £8.3m, against a comparable £358.3m loss.

While its North American and Northern European divisions fared better, reflecting the progress the company made in reducing its exposure to fixed costs and cutting capacity, the core UK business still lost £59m in the 12 months to end September. The company, which is changing its year-end to 31 October, lost £325.4m during the previous year.

The group predicted it would make an operating profit in each of its three divisions - the UK, Northern Europe and North America - in 2006. It hopes to achieve industry margins of 3.5 per cent by 2007.

Mr McHugh said: "We've taken enormous steps forward in the UK. We can clearly see things improving and momentum is building although there is clearly a lot more that still needs to be done."

MyTravel is planning to slash the number of package holidays on sale for summer 2005 by up to 25 per cent, in an attempt to avoid having to sell off holidays cheaply in the so-called "lates" market. Last summer it cut the number of package holidays on sale in the UK by 13 per cent. Mr McHugh admitted he would have preferred to slash capacity further last summer, but was tied into operating 33 aeroplanes. MyTravel's move is likely to mean there are fewer package holidays - and fewer cheap deals - on offer next summer.

The company has followed First Choice, its only other quoted UK rival, and cut the number of aircraft in its fleet to 24 for next summer. The move should increase its operational flexibility. First Choice reported pre-tax profits of £74.5m for the 12 months to 31 October.

MyTravel said the total bill for its restructuring would be £40m, split between last year and next year. It declined to comment on the size of its legal bill.

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