MyTravel debt-for-equity swap to leave shareholders with 4%

The £800m debt-for-equity swap proposed by the debt-saddled tour operator MyTravel will leave shareholders with just 4 per cent of the company, it emerged yesterday.

The £800m debt-for-equity swap proposed by the debt-saddled tour operator MyTravel will leave shareholders with just 4 per cent of the company, it emerged yesterday.

MyTravel plans to complete the swap by the end of the year, shortly before the next bond interest payment in January.

Not all creditors are happy with their 96 per cent slice, however. "Some bondholders are very pleased with it; others are less pleased," a spokeswoman for MyTravel said. "People want to see the circular, which should go out next month."

About three weeks after that, bondholders and shareholders will vote on the proposal at separate meetings. The company, led by its chief executive Peter McHugh, needs the backing of 75 per cent of bondholders who vote as well as three-quarters of voting shareholders to get its proposal through. The spokeswoman said that Royal Bank of Scotland and Barclays, which led the discussions with MyTravel on behalf of the more than 20 lenders, are supportive of the proposed swap.

Once the restructuring is completed, the lenders would hold 88 per cent of MyTravel's share capital while the holders of 216 million convertible bonds would hold 8 per cent. The company's debt will be reduced to £140m of aircraft finance leases.

"It looks like a good deal to me," said Chris Smith, a private bondholder who bought the first lot about a year ago and purchased some more bonds yesterday in the hope of a big return. But he noted that other bondholders may get back less than they put in.

MyTravel shares dropped 0.3p, or 5.7 per cent, giving the company a market value of £27m. A string of acquisitions and accounting errors led to mounting debts at MyTravel, formerly known as Airtours, which announced last year that it would refinance its debt. The company, which slipped into losses after the 11 September terrorist attacks, predicted yesterday that it would break even at the operating level in the year to the end of September.

Faced with widening losses, the travel company has had to sell businesses including World Choice Travel and Frosch Touristik and cut its air fleet as well as staff.