Thomas cook has announced a comprehensive restructuring deal that will save the struggling travel agent and airline operator. China’s Fosun Tourism will acquire a 75% stake in the Group Tour Operator and a 25% stake in the Group Airline, which includes German carrier Condor along with U.K., Spanish and Scandinavian operations, for £450 million. Additionally, lenders’ debt will be converted into equity, with banks and bondholders consolidating and converting £450 million of debt into a 25% stake in the Group Tour Operator and a 75% stake in the Group Airline.
While the deal guarantees the survival of Thomas Cook, the recapitalization plan is subject to a legally binding agreement between the parties, but shareholders will be left with a severely diluted holding in the Group. In May 2018 shares in Thomas cook were trading at £1.50, but today were trading at just above £0.06, having dropped 12% once news of the deal was confirmed.
Established in 1841, Thomas Cook is the oldest surviving name in the travel industry and was responsible for the introduction of the first ‘package holiday’. However, an unusually hot summer in 2018, combined with high levels of debt and a highly competitive marketplace saw the Group struggle to survive. Current debt levels meant that Thomas Cook had to sell three million holidays a year purely to cover interest payments on the Group’s debt.
Fosun Tourism is no stranger to the leisure industry as it is also the owner of Club Med. Fosun International was co-founded by billionaire Guo Guangchang and is one of China’s biggest conglomerates which has invested billions of dollars over the past decade in tourism, healthcare and fashion companies in Europe and the United States.