Debt-ridden Thomas Cook close to receiving $1.9-bn lifeline

Thomas Cook Group Plc, is close to striking a £1.2 billion ($1.9 billion) loan from its bankers that will give the troubled debt-ridden travel services provider time to turn round the company, The Sunday Times yesterday reported, citing an unidentified person close to the lenders. 

Thomas Cook, Europe's largest tour operator and UK's second-largest foreign exchange group, which had total debt of £1.25 billion ($2 billion), is close to extending the maturity on its bank loans to 2015 from Royal Bank of Scotland and Barclays.

But the deal comes with stringent conditions including higher interest and a one-off fee. The banks will also have the right to buy 5 per cent of the company's shares.

The new financing comes after the embattled travel agency, which has a market capitalisation of approximately $6 billion, received an emergency £200 million loan from its lenders last November.

Manny Fontenla-Novoa, who led Thomas Cook since 2007, had resigned in August 2011 after three profit warnings in a year amid weak demand for travel that triggered an 80 per cent decline in its share price.

The company blamed the nearly £400 million loss in the first six months of 2011 to the floods in Thailand and the uprisings in Egypt and Tunisia.