Thomas Cook’s rescue plan could be blocked by its bondholders reluctant to see the value of their shares further diminished.
Citigroup analyst James Ainley – who declared the travel giant ‘worthless’ in May – said that if the rescue plan goes ahead, the shares would be worth just 3p each.
Currently they are worth just over 5p, having fallen 62% since Thomas Cook announced it was in advanced discussions with its Chinese investor Fosun last Friday.
They are hammering out a deal that will see Fosun, which already owns 18% of Thomas Cook, take a majority stake in the tour operator and a minority stake in its airline operations.
The deal has been welcomed by Thomas Cook pilots, but Citigroup’s Ainley said it threatens to dilute its overall stock by about a billion pounds.
Ainley questioned whether bondholders would accept the proposed debt-for-equity swap, given the depleted valuation of the shares they would receive.
He denounced the plan as seemingly ‘unrealistic’ in a research note, adding that Thomas Cook would probably have to issue fewer new shares than proposed, or persuade investors that it has a strong turnaround plan, but he said there had been little detail from Thomas Cook on its recovery blueprint.
