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Thomas Cook set for £750mln bail-out from Chinese backer Fosun

Neil Wilson at Markets.com said the refinancing is basically ‘wipe out time’ for shareholders.
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Under the proposals, Fosun will take a majority stake in Thomas Cook's tour business and a minority stake in its airline in return for the cash

Embattled holiday group Thomas Cook Group PLC (LON:TCG) is in advanced talks about a £750mln injection of funds from shareholder Fosun that looks set to hand control to the Chinese group.

Under the proposals, Fosun will take a majority stake in the tour business and minority stake in its airline in return for the cash.

Lenders are also said to have agreed to convert a significant portion of Cook’s bank and bond debt into equity.

The travel group currently has debts of £1.25bn compared to a market value last night of about £204mln.

Cook underlined its difficult situation with a downbeat trading statement that said tour bookings for this summer are down by 9% with fierce price competition driving down prices.

Airline bookings are also down 3% in spite of a 2% rise in prices.

Underlying profits for the second half will be lower than last year, Cook added.

A strategic review was launched in February focused on a sale of the airline, tour business or both.

Trading conditions though had deteriorated and neither of these options were possible for a price that would have made a difference, said the tour group.

Neil Wilson at Markets.com said the refinancing is basically ‘wipe out time’ for shareholders.

“Whilst this has long been seen as the likely route out of the mire for Thomas Cook, there are several questions remaining, for instance, how would this deal impact the proposed airline sale?

“Management say they are pausing the sale but it is likely be dead if Fosun take over.”

By Friday afternoon, shares in Thomas Cook had plunged 48% to 6.85p.

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