Shareholders likely to be wiped out in MyTravel refinancing

The troubled holiday company MyTravel is understood to be putting the finishing touches to a financial restructuring that could almost wipe out existing shareholders.

The troubled holiday company MyTravel is understood to be putting the finishing touches to a financial restructuring that could almost wipe out existing shareholders.

Speculation mounted yesterday that the group, whose debts of £1.3bn dwarf its £28m market capitalisation, would today present its lenders with a new rescue plan. "We're anticipating a firm proposal to creditors on Thursday," a source close to creditors said. "No one knows enough about it yet to form an opinion."

In May, Peter McHugh, the chief executive, reiterated his warning that another refinancing was on the cards that "may result in a very significant dilution of the interests of shareholders".

The group narrowed its interim losses to £200m from £618m but even in May warned that summer bookings in the UK were under pressure. During the past year, net liabilities have more than doubled to £878m - a burden Mr McHugh has admitted "seriously restricts the group's room for manoeuvre".

MyTravel, which takes 10 million people on holiday annually, has been in freefall for two years since its former chief executive, Tim Byrne, owned up to an accounting black hole and said it had seriously overestimated summer demand. Since then it has shrunk in size, selling off operations around the world in an attempt to get a grip on its business.

The group's existing banking covenants run until the middle of 2006 but it has consistently said it plans to renegotiate them well before then. Its shares, which have collapsed from a peak of 525p in August in 1999, have nosedived all summer as shareholders finally wake up to the fact that any restructuring will formally hand over control of the company to its bankers. MyTravel declined to comment.

"This is no longer an equity story. The share price tells you what you need to know in terms of expectations. The bottom line is you can't value the stock - there is no visibility on earnings, the balance sheet or financing," one travel industry analyst said. Shares edged higher to 5.43p from 5.26p.

MyTravel, which lost its chief operating officer, Philip Jansen, in June, recently appointed Michael Beckett as chairman.