Travel operator Thomas Cook said it had agreed the main terms of a rescue package that will see Hong Kong’s Fosun Tourism take over its tour operations and creditor banks and bondholders acquire its airline.
Fosun Tourism’s parent Fosun International was co-founded by billionaire Guo Guangchang and is one of China’s biggest conglomerates.
It has spent billions over the past decade on healthcare, tourism and fashion companies in the US and Europe. As well as Club Med, Fosun International also owns English Premier League’s Wolverhampton Wanderers.
The recapitalisation plan will result in a significant dilution in existing Thomas Cook shareholders’ interests, the company said.
Shares in Thomas Cook, which were trading at 150 pence in May 2018, plunged a further 16% to just under 6 pence in the latest session.
AJ Bell investment director Russ Mould said shareholders in the troubled travel company may have to accept that their investment could be worthless.
The world’s oldest travel company, and pioneer of the package tour, has struggled with intense competition in popular destinations, high debt levels and an unusually hot summer in 2018 which reduced its last-minute bookings.
The debt burden meant the company had to sell three million holidays a year just to pay the interest, it said last month.
Thomas Cook also said in July that it was working to secure new investment from shareholder Fosun Tourism which would see the Hong Kong group take control of the business, along with its lenders whose debt would be converted into equity.
The terms will see Fosun contribute £450m ($552 million) of new money in return for at least 75% of the tour operator business and 25% of the group’s airline.
Thomas Cook’s lending banks and bondholders will stump up a further £450m and convert their existing debt to equity, giving them in total about 75% of the airline and up to 25% in the tour operator business.
Earlier this year, Thomas Cook said it was exploring a sale of its airline business, which consists of German carrier Condor and UK, Spanish and Scandinavian operations, but a further profit warning in May left it seeking a more radical solution to save the business.
Fosun said earlier this year it would adopt an asset-light strategy and run Club Med resorts it plans to launch in China and other countries.