FRANKFURT Thomas Cook Group Plc (TCG.L) gained a three-year funding lifeline worth 1.4 billion pounds on Saturday, giving the world's oldest travel group more time to turn around its recession-scarred business.
The 170-year-old firm warned about its profits three times last year as civil unrest in North Africa and the economic downturn in Britain hurt bookings, and it has been forced to consider a number of fundraising proposals.
Groaning under 890 million pounds of debt, it secured a 200 million pound rescue package from its lenders in November, started selling assets and reviewed its underperforming businesses.
In the new agreement, Thomas Cook's lenders extended the $2.26 billion of financing, most at higher rates of interest, to May 31, 2015 from previous expiry dates between 2013 and 2014.
The firm said they had raised the interest margin on 1.2 billion pounds of funds to 3.50 percent over Libor, most of which carried a margin of 2.75 percent over Libor before. The 200 million pound package obtained in November kept its margin unchanged.
The lenders, which include Royal Bank of Scotland Group Plc (RBS.L), will also receive warrants to subscribe for new Thomas Cook shares representing about 5 percent of issued share capital and will be entitled to a 1 percent amendment fee.
"This bank agreement, together with these actions, places Thomas Cook on a much firmer footing," chairman Frank Meysman said in a statement.
Thomas Cook endured a dire 2011 with more than half a billion euros in losses that culminated in the departure of veteran chief executive Manny Fontenla-Novoa in August.
Meysman said the search for a new CEO was progressing well.
Thomas Cook said it was in advanced talks to sell and lease back 17 to 19 aircraft, or roughly one in five planes out of its total fleet, as part of its disposal program to get cash and boost liquidity.
It said it had received a "good level" of expressions of interest in its Indian business (THOM.NS), and potential buyers would now conduct due diligence.
It also recently agreed to sell its Explorers Hotel in France, where it said market conditions remained very challenging. It will seek shareholders approval for that disposal as well as the aircraft deal in May.
Thomas Cook, which reported an uplift in business in March, is banking on stable cash flow from its Northern Europe and German businesses, though it said it saw scope for further improvement thereby increasing online sales and reducing costs.
It reshuffled management at its underperforming businesses in Canada, Russia and France, where it sees substantial scope to improve results. It also said on Saturday a plan to turn around its UK business was under way and progressing well.
($1 = 0.6189 British pounds)
(Reporting by Maria Sheahan; Editing by John Stonestreet)