Thomas Cook in bailout talks with China's Fosun

China's Fosun to invest £750m in debt-ridden Thomas Cook

China's Fosun to invest £750m in debt-ridden Thomas Cook

Under the proposal, an injection of £750m of new money would be provided to the company, offering it sufficient liquidity to trade over the winter 2019/20 season and "invest in the business for the future".

A Thomas Cook Airbus A321-200 airplane takes off at the airport in Palma de Mallorca, Spain, July 28, 2018.

Fosun Group is already a minority investor in Thomas Cook - with a stake of about 18 percent - and owns French luxury holiday resort group Club Med SAS, which it bought for more than US$1 billion in 2015.

The Shanghai-based Fosun Group conglomerate has been on a buying spree in recent years, and taking control of Thomas Cook would significantly expand its business in Europe.

Chief executive Peter Fankhauser said: "While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees".

Fankhauser said the proposed deal with Fosun and lenders would put the firm on a "totally different financial footing" with "massively reduced debt levels". Thomas Cook is now looking for large amount of its external bank and bond debt will be changed into equity, and its existing shareholders' stakes will be diluted after the recapitalization.

Analysts said Thomas Cook's predicament showed how businesses needed to be careful with their balance sheets, particularly in sectors with unpredictable costs and earnings.

Thomas Cook, worth roughly $4 billion after it debuted in June 2007, now has a market value of about $255 million and has seen its stock more than halve in value so far this year.

The company on Friday said summer bookings in its tour operations business were down 9 per cent, while those at its airline business are down 3 per cent, likely leading to operating profit in the second half of the year coming in lower than the year-ago period.

It is one of China's so-called "gray rhino" companies - along with Dalian Wanda Group Co (萬達集團), HNA Group Co (海航集團) and Anbang Insurance Group Co (安邦保險集團) - that have come under growing scrutiny in the past few years from Chinese authorities wanting to crack down on debt-fueled foreign acquisitions.

Its higher-margin airline business - which includes German holiday carrier Condor - made £3.5 billion in revenue.

"Fosun is hoping that Thomas Cooks' brand name and global reach will expand its business among wealthy Chinese tourists", Andrew Collier, managing director at Orient Capital Research, told Bloomberg News.

The proposal is subject to due diligence and further discussion, among other things, Fosun said.

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