Thomas Cook Group is locked in a stand-off with its pension scheme trustees ahead of a crucial week that could determine the fate of a £900m rescue deal.
Sky News has learnt that the trustees demanded at a meeting earlier this week that they receive sweetened terms in exchange for backing the recapitalisation of the world’s oldest tour operator.
Sources said the pension scheme, which is in surplus on an accounting basis, was seeking equity in the restructured company, funding guarantees and a commitment from the new owners to continue existing annual contributions of more than £25m.
Those contributions are designed to ensure the scheme is fully funded under a low-risk self-sufficiency valuation method.
The company is understood to have highlighted concerns about the trustees’ demands, arguing that it is for other stakeholders – including China’s Fosun Tourism Group – to determine whether they are realistic.
One stakeholder said the trustees’ requests were “ludicrous given the haircuts other creditors were taking”.
The trustees have appointed the accountancy firm Grant Thornton and the public relations outfit Smithfield to advise them.
Sources said The Pensions Regulator had also been involved in talks about the situation.
Under the terms of the rescue plan, on which Thomas Cook said 10 days ago it had reached “substantial agreement”, Fosun would inject £450m of new money into the company, in return for 75% of its tour operating business and 25% of its airline.
Lending banks and bondholders would contribute £450m in aggregate and write off £1.7bn in existing debt in exchange for the remaining stakes in the two divisions.
That would leave shareholders being effectively wiped out by the restructuring.
EU ownership rules prohibit Fosun from controlling the Thomas Cook airline business.
The stand-off between Thomas Cook and its pension trustees has added to the complexity of finalising the rescue bid by early October.
Sources said this weekend that a crucial board meeting next Wednesday was likely to decide on the optimal route to completing the deal in the next four weeks.
They added that this could mean cancelling Thomas Cook’s public listing.
A source close to the board said this weekend said it “continued to remain committed to seeking a solution for shareholders”.
The company needs to receive the new money from the recapitalisation by early October in order to pay key suppliers.
Thomas Cook also needs to persuade the Civil Aviation Authority, which administers the ATOL scheme that covers travel companies, that it should renew its licence at the end of September for another 12 months.
Current trading is understood to remain difficult, with the ongoing political crisis in Westminster contributing to soft consumer demand for autumn and winter bookings.
The urgency surrounding the rescue talks highlights the difficulties facing a company that recorded £9.6bn of revenue last year and employs 21,000 people.
11m customers will have travelled with Thomas Cook by the end of the crucial summer season, making it one of the UK’s most prominent consumer brands.
Fosun Tourism Group, which owns Club Med, is understood to remain committed to the rescue deal in principle, having built a big stake in the London-listed company during the last four years.
Shares in Thomas Cook have whipsawed for months as investors have sought to calculate whether the stock retains any residual value.
On Friday, they closed at 5.44p, valuing the company at less than £87m.
Despite the calamitous decline, Fosun views Thomas Cook as a valuable platform for further expansion into the European travel market..
Thomas Cook was founded in 1841 by a 32 year-old cabinet-maker and former Baptist preacher who began offering one-day rail excursions from Leicester to Loughborough for a shilling.
From there, it went on to become one of the world’s largest holiday companies, marking its 175th anniversary four years ago.
Thomas Cook and Fosun have a joint venture in China which is showing strong growth, with an eightfold increase in customers last year.
The introduction of own-brand resorts in the world’s second-largest economy has also opened up the domestic Chinese market to Thomas Cook.
In recent months, Thomas Cook has fielded varying degrees in parts or all of its airline, its northern European business, and its tour operator.
Neset Kockar, a Turkish travel industry executive, has also taken an 8% stake in the group and signalled that he wants to play a role in the outcome of the rescue talks.
Fosun is working with bankers at Lazard on the proposed deal, while the company is working with PJT Partners and its syndicate of lenders is being advised by FTI Consulting.
Credit rating agencies have downgraded Thomas Cook in the wake of a £1.5bn half-year loss.
The company has become embroiled in an increasingly frantic bid to shore up confidence among consumers and lenders as it pointed to the absence of a Brexit deal’s impact on customers’ willingness to book overseas holidays during the crucial summer period.
Thomas Cook and its pension trustees declined to comment this weekend.
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