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Thomas Cook in talks over further ?150m cash injection

By Michele Maatouk

Date: Monday 12 Aug 2019

Thomas Cook in talks over further ?150m cash injection

(Sharecast News) - Thomas Cook said on Monday that it is in talks with its creditors about a further £150m cash injection, on top of the £750m it is negotiating with Chinese shareholder Fosun.
The travel company said the additional capital will provide further liquidity headroom through the coming 2019/20 winter cash-low period and ensure the business can continue to invest in its strategy.

The group also said that since the initial announcement last month, "significant progress" has been made towards finalising the key transaction terms of the recapitalisation with Fosun, core lending banks and noteholders representing around half the company's 2022 and 2023 senior notes.

It said existing shareholders are expected to be "significantly" diluted as part of the recapitalisation, which it expects to implement in early October.

At 1205 BST, the shares were down 17% at 7.95p.

Neil Wilson, chief market analyst at Markets.com, said the need for a further cash injection suggests the cash crunch facing Thomas Cook ahead of the winter season is worse than feared and points to the precarious position of the balance sheet.

"Shares had been buoyed up post the July 12th announcement amid some doubts the deal would go through - existing shareholders were hopeful that instead TCG could flog its airline and somehow salvage some value.

"As noted following the July 12th update, this deal will effectively hand over the company to the Chinese firm. Shareholders face significant dilution - wipeout time. Since that time the market cap of the group has fallen to around £125m, with net debt of around £1.25bn. Fosun will be left entirely in control. This is massive deleveraging at the expense of shareholders - harsh medicine but entirely needed.

"The only outstanding question seems to be whether Fosun runs foul of Chines regulators who are concerned about companies overleveraging to fund acquisitions, particularly in light of the escalation of the US-China trade war and the ensuing worries around the yuan and any large-scale capital outflows."

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