LONDON Thomas Cook (TCG.L) faces an uphill task to restore the confidence of customers and investors ahead of the new year booking season after revealing a 30 percent drop in UK sales in the days following news of its financial troubles.
The world's oldest travel firm secured a rescue package from its lenders late Friday following days of frantic talks, but analysts say the damage is severe.
"Trading was challenging enough, but this could have been further exacerbated by the events of the past week," said Peel Hunt analyst Nick Batram.
Shares in Europe's second-biggest travel firm by sales rose by as much as two-thirds of their value in early trade on Monday, although the gains were partially pegged back as investors digested details of the travel firm's emergency loan.
The stock, which has lost nearly 90 percent of their value over the past year, was up 33 percent at 24.02 pence at midday.
The company's battered bonds -- a 7.75 percent 300 million pound 2017 bond and a 6.75 400 million euro bond maturing in 2015 -- recovered to around 48 pence in the pound, according to Tradeweb, having sunk to 30 last week.
Thomas Cook, which had issued a string of profit warnings over the past year, blamed the slump in bookings by British customers on uncertainty over the company's future.
"We were down 30 percent on bookings which is of course substantial but, on the other hand, it could have been much more had our customers not shown loyalty to us, Acting Chief Executive Sam Weihagen told the BBC in an interview Saturday.
TUI Travel TT.L, owner of the rival Thomson and First Choice brands, has looked to cash in on its rival's misfortune, placing advertisements in national newspapers stating: "Another holiday company may be experiencing turbulence, but we're in really great shape."
Thomas Cook said Friday its banks, led by Barclays (BARC.L), HSBC (HSBA.L), RBS (RBS.L) and UniCredit (CRDI.MI), had agreed to provide a new 200 million pounds ($310 million) facility available until April 2013. It replaces a 100 million pounds short-term facility announced in October.
The banks have also agreed to relax the terms of upcoming tests of its financial health.
Thomas Cook will pay about 6 percent interest on the loan, rising 0.5 percent every quarter. Evolution analyst James Hollins said that was a "high price but not extortionate."
Hollins estimates the new facility pushes Thomas Cook's gross debt up to around 1.5 billion pounds, but said the timing of the company's latest difficulties gives it time to restore confidence ahead of the key post-Christmas booking period.
"Fortunately, all the bad press has come at a relative low point in the booking cycle and the group has the funds and time to restore partner and consumer confidence in its brand and survival," Hollins said.
The company, which takes over 22 million people on holiday each year, asked its lenders to come to its rescue for the second time in five weeks last Tuesday, sending its shares into freefall.
Thomas Cook has embarked on a strategic review as it looks to bring down its debt. It has already announced plans to raise 200 million pounds through disposals and analysts expect it to close hundreds of shops.
"The required internal changes are a tall order in a structurally flawed industry," said Hollins.
Tour operators have struggled as the emergence of low-cost airlines and the internet led to more holidaymakers booking their own flights and accommodation online.
Peel Hunt's Batram said the recapitalization of the business is likely to be painful and the company will need to resort to an equity fundraising.
"Institutions are likely to be asked to contribute to an equity refinancing and back a management team where credibility has been damaged," he said, adding the company may need to raise another 600 million pounds.
The company is searching for a new chief executive after industry veteran Manny Fonenla-Novoa quit in August.
Thomas Cook had issued a string of profit warnings and last week delayed publication of its full-year results.
It has been hit hard by tough trading conditions, especially in Britain, where its core customer base of families with young children has been particularly affected by tough economic conditions. Bookings were also impacted by unrest in popular destinations such as Egypt, Tunisia and Morocco.
($1 = 0.6458 British pounds)
(Additional reporting by Natalie Harrison; Editing by David Holmes and Andrew Callus)