Mytravel wins three-year lifeline from bondholders

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The Independent Online

Mytravel, the debt-laden tour operator, has won support from its bondholders for a crucial refinancing deal that will buy it a three-year lifeline.

Mytravel, the debt-laden tour operator, has won support from its bondholders for a crucial refinancing deal that will buy it a three-year lifeline.

The maturity date of the group's £221.6m of convertible bonds has been extended by three years after 99.68 per cent of its debt holders voted in favour of the move at a meeting yesterday. The group's shares rallied in relief, closing up 3.5p at 20.75p.

Without the extension, the group would have breached its banking covenants, forcing it to repay £1.3bn of recently refinanced debt. Failure to refinance the bonds would have also threatened its air travel organisers' licence, which tour operators must have to sell holidays.

MyTravel, formerly known as Airtours, needed the breathing space to sort out its troubled business operations after a disastrous 18 months that saw it dive into the red and lose its entire executive board from its chairman and founder, David Crossland, down. "This gives the company the time and space they need to focus on their turnaround plan," a spokeswoman said.

As part of the extension, the debt-holders will get a 21 per cent stake in the company and see the annual rate of interest they receive rise to 7 per cent from 5.75 per cent. The move will cost the group a success fee of up to £11m.

Although just six bondholders turned up in person to yesterday's meeting, MyTravel received responses from 68 per cent of its bondholders, representing debt worth £151.7m. Approval from the vital quorum ends the first chapter in the company's rescue plan, enacted by its recently appointed chief executive, Peter McHugh.

The company's next task is to pick up its trading performance, blighted by years of mismanagement and compounded by the slump in the travel market following the terror attacks two years ago. It warned last month that profits would miss expectation, blaming pricing decisions made by the previous chief executive, the heatwave over the summer and the strength of the euro.

Eric Sanderson, the chairman, admitted last month that the group's future remained on a knife-edge. He hinted that the company may require a further refinancing unless trading improved, warning that its high level of fixed costs and its debt mountain meant that its earnings and cash flows would "remain subject to significant risk" in the medium term.

There was no news on any progress to sell several of its North American businesses, which forms part of its turnaround plan to help slash its debt pile. It owns a cruise holiday agency in the US, which it acquired in 2000 for $385m (£243m) and a rental-car outfit.

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