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Travel Operator Under Pressure to Raise Additional Funds – Wall Street Journal

Troubled British travel company

Thomas Cook Group

PLC is under pressure from lenders to find an additional £200 million ($249.5 million) to avoid the collapse of a rescue deal that would see Chinese conglomerate

Fosun International
Ltd.

inject significant funds.

London-based Thomas Cook said Friday it had received a request from its banks and bondholders to organize a stand-by facility that would cover the coming winter season, so that the company has access to additional liquidity when trading is low. During these months, the company’s working capital needs are higher, potentially adding to the strain on its finances, according to Jean-Pierre Husband, a director at Fitch Ratings Ltd.

Thomas Cook said it expects talks with banks and bondholders will continue throughout the weekend.

Britain’s oldest packaged-holiday company could go out of business within days if the rescue deal, initially agreed in July, doesn’t go through, a person familiar with the matter said. Under the initial deal, Fosun would become the largest shareholder in Thomas Cook’s tour business and get a minority stake in the company’s airline business. A large part of Thomas Cook’s debt of £1.24 billion at the end of March would be swapped into equity. The rescue deal was supposed to be voted on by creditors on Sept. 27. A recapitalization, consisting of the stand-by facility and £900 million of fresh capital injected by banks, bondholders and Fosun, could significantly dilute existing shareholders’ interests, Thomas Cook said.

Fosun said Friday its proposed contribution of £450 million has not changed. “We are still working tirelessly with a large number of other stakeholders and interested parties to find agreement on the company’s proposed [recapitalization] plan,” Fosun said in a statement.

Thomas Cook is currently in the process of prolonging its license as an operator of packaged holidays, a regular procedure that applies to all companies offering these kinds of travel services, according to a spokesman for the U.K. Civil Aviation Authority, a regulator.

Should Thomas Cook fail to extend its license by Sept. 30, the U.K. government could be forced to fly home thousands of customers holidaying abroad. There are about 600,000 customers currently on holiday outside of the U.K., Thomas Cook said.

The company has struggled with a decline in tour and flight bookings, higher fuel prices and uncertainty surrounding Britain’s planned departure from the European Union. “It is clear that the trends experienced in the first half of the year have continued into the second half, reflecting an uncertain consumer environment, particularly in the U.K., leading to intense competition,” Thomas Cook said in a statement in July.

Thomas Cook on Friday didn’t comment on reports saying that it is exploring a sale of its Nordics business to raise additional cash.

Such a transaction won’t solve the longer-term issues surrounding the travel company and might force the parties involved to renegotiate the rescue deal, said Kathryn Leonard, an associate director at Numis Securities Ltd. “They would have to revisit the terms of the current proposal,” Ms. Leonard said.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

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Travel Operator Under Pressure to Raise Additional Funds – Wall Street Journal

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