(Bloomberg Opinion) -- Thomas Cook Group Plc’s rescue by Fosun Tourism Group moved a step closer on Wednesday as creditors approved a 900 million-pound ($1.1 billion) bailout led by the Chinese investor.
The ailing British travel company’s shareholders could be forgiven for thinking they have got the loungers on the shady side of the pool.
Under the terms of the deal, Fosun will own 75% of the tour operator and 25% of the airline, in accordance with European Union rules requiring airlines to be majority-owned by European investors. Creditors will own 25% of the tour operator and 75% of the airline.
This deal isn’t quite done yet – completion is targeted for October. But it should be sufficient to see Thomas Cook through the low winter season. That should reassure customers and prevent any further slide in trading.
What’s more, unlike other attempts to strengthen the company’s finances, this one doesn’t rely on the sale of the airline. The banks and bondholders may not be long-term owners of a majority stake in the group’s airline, but a sale isn’t needed right now to support this recapitalization.
The company’s 750 million euros of 6.25% bonds due in 2022 rose as much as 48% on Wednesday, before paring that gain. The shares fell 18% to 5.8 pence.
That’s a sign there will be little left for stockholders, who have seen their shares slump by 93% over the past year. Thomas Cook said it intends to maintain a listing, but it acknowledged that the recapitalization may lead to it being de-listed.
Shareholders may be able to invest alongside Fosun and lenders. Given that they are likely to see their existing holdings wiped out, it’s hard to see much appetite for more exposure.
The recapitalized Thomas Cook will still face competition from Germany’s TUI AG, which has the advantage of also owning hotels and cruise ships, as well as a stronger balance sheet. Thomas Cook must also continue to navigate turbulence from Britain’s exit from the European Union and the knock-on effects on the both sterling and the U.K. consumer.
Fosun’s long game seems to have paid off here. It will get control over Thomas Cook’s prize asset, the travel agency, and a minority stake in its airline – without having to pay a premium to shareholders.
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
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Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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