MyTravel threatens to cut back bondholders' stake in refinancing

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The Independent Online

The debt-saddled tour operator MyTravel piled pressure on bondholders to approve its rescue plan by threatening to cut their stake in the company to just 2 per cent.

The debt-saddled tour operator MyTravel piled pressure on bondholders to approve its rescue plan by threatening to cut their stake in the company to just 2 per cent.

MyTravel racked up £1.3bn in debts in a string of acquisitions in recent years and last month proposed to slash these debts by exchanging £800m for equity. Some of the holders of £216m of convertible bonds have been unhappy with their proposed 8 per cent slice of the company.

To bring them into line, MyTravel has set an ultimatum of 17 November for bondholders to give 75 per cent majority backing to the "consensual" deal - or see their slice cut to 2 per cent.

The company is hoping that bondholders, shareholders and banks will all agree to its initial "consensual" restructuring proposal. A spokeswoman for MyTravel said: "This is a contingency plan in case bondholders don't agree." She stressed that the circular setting out details of the proposed deal had not yet gone out to bondholders. The convertible bond debt is subordinate to MyTravel's unsecured debt and bondholders would get nothing in the event of liquidation, she said.

The company saidif it did not get the bondholder majority, it would initiate a court procedure on 18 November to transfer the equity and liabilities of the existing company into a new holding company. Shareholders and the lending banks would get a vote on the scheme but the convertible bond holders would not.

Under the consensual plan, MyTravel's lenders would emerge as the most powerful, owning 88 per cent of the company, while shareholders will retain just 4 per cent. The 20-plus lenders, led by Royal Bank of Scotland and Barclays, have indicated they support the debt-for-equity swap. Bondholders and shareholders will vote on the plan at separate meetings.

MyTravel bought more than a dozen companies in the two years before the 11 Septemberattacks. It slipped into losses after the 2001 attacks but predicted that it would break-even at the operating level in the year to the end of September.

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