MyTravel warns over loss of licence

MyTravel warned that it would lose its licence from the Civil Aviation Authority and cease trading if its proposed £800m debt restructuring plan does not go through by the end of the year, stepping up pressure on bondholders to approve the rescue.

MyTravel warned that it would lose its licence from the Civil Aviation Authority and cease trading if its proposed £800m debt restructuring plan does not go through by the end of the year, stepping up pressure on bondholders to approve the rescue.

If the company goes bankrupt, the holders of £216m of convertible bonds would get nothing, as the convertible debt is subordinate to MyTravel's unsecured debt, a spokeswoman said. MyTravel, which owns Airtours Holidays, Tradewinds and other travel assets, racked up £1.3bn in debts during an expansion drive in recent years. The company, headed by Peter McHugh, last month proposed to slash its borrowings by exchanging £800m for equity.

Bondholders have already been warned they have until tomorrow to give the rescue plan 75 per cent backing or see their proposed 8 per cent stake slashed to 2 per cent under an alternative scheme of arrangement. MyTravel repeated its threat to start court proceedings on Thursday to transfer its equity and liabilities into a new holding company. Shareholders and lending banks would get a vote on the scheme but bondholders would not.

It emerged yesterday that up to 50 executives at MyTravel will get a 5.6 per cent stake in the struggling tour operator if the restructuring goes through. MyTravel said the share option scheme was designed to retain and incentivise senior management. It will have to be approved by shareholders and will be linked to performance targets related to increasing the market capitalisation of the company.

Under the rescue plan, MyTravel's lenders would emerge as the most powerful, owning 88 per cent, while shareholders would retain just 4 per cent. MyTravel said a "significant majority" of the 20-plus lenders, led by Royal Bank of Scotland and Barclays, have indicated they support the debt-for-equity swap. A date for the shareholder meeting has not been set yet.

Bondholders have hired Cadwalader, Wickersham & Taft and Houlihan Lokey Howard & Zukin as legal advisers. They issued a statement on 3 November saying the bondholders' preference "remains a consensual deal but it must be a fair deal". They said they regretted MyTravel's "precipitative" action to file a scheme of arrangement without first negotiating with convertible bondholders.

MyTravel wants to complete the restructuring by the end of the year to avoid paying more interest on its huge borrowings.