Thomas Cook Shares Recover

It was doom and gloom for Thomas Cook last week when the full extent of their debt woes became apparent and the group’s share price tumbled.

All eyes were on the group at the weekend when bosses negotiated hard for a last-ditch £100 million loan.

With finance secured ahead of the markets reopening on Monday Thomas Cook had an excellent trading day with shares jumping by 50%.

Thomas Cook shares jumped as much as 50%, to 30p, this morning after its banks threw the troubled travel company a £100m lifeline late on Friday.

The shares were the biggest riser on the FTSE 250 index this morning, and later traded 33%, or 5.9p, higher at 23.9p. Anyone who bet on a bank rescue when the debt-laden tour operator admitted it was in serious trouble last Tuesday would have tripled their money. The shares plummeted to a low of 9p then.

The travel company then spent three days talking to its banks, which resulted in the £100m loan extension, together with a loosening of borrowing terms. This means Thomas Cook will not breach a critical banking covenant test at the end of next month.

Mark Brumby at Langton Capital said:

The [£200m] facility announced by Thomas Cook will replace the 100m facility that was announced in October and will not come cheap. The coupon is said to be 6% and will rise by 0.5% every quarter until April 2013. This will almost certainly trigger further cost cutting and disposals leading to the repayment of this relatively expensive loan.

Acting CEO Sam Weihagen has denied that the banks will be running Thomas Cook for the foreseeable future and, though he is quoted in Travel Weekly as saying that bookings in the UK have fallen by 30% in the wake of poor publicity, he says ‘we have seen normal bookings in the rest of the group’. The drop ‘was for a couple of days and was to be expected’. Having set a cat amongst the pigeons by announcing their postponement last week, the group will announce its full year results in the week commencing 12 December.