Thomas Cook enlists China's Fosun to salvage oldest travel firm

China's Fosun to invest £750m in debt-ridden Thomas Cook

China's Fosun to invest £750m in debt-ridden Thomas Cook

He added: "After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the Board has made a decision to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks".

The company said the injection would "provide sufficient liquidity to trade over the winter 2019/20 season and the financial flexibility to invest in the business for the future".

The Shanghai-based Fosun Group conglomerate has been on a buying spree in the past few years, and taking control of Thomas Cook would significantly expand its business in Europe.

As part of the deal to keep afloat the package holidays firm is suggesting a debt-for-equity swap with lenders that will likely virtually wipe out what's left of any value for now shareholders.

"We are committed investors and have extensive experience in turning around iconic brands including Club Med and Wolverhampton Wanderers FC", confidently states Fosun Tourism.

In the wake of the announcement, Thomas Cook saw its share price fall more than 45% on Friday, with the deal leaving Fosun in control of the tour operator and controlling minority interest in its airline business.

It also means that if Thomas Cook started paying dividends again in future, as unlikely as it may seem at this point, existing shareholders would get a lower proportionate share of any such dividend.

Unsurprisingly the market hates the idea, sending Thomas Cook's share price crashing more than 46% in mid-morning trading.

The British holiday company's tour business had 11 million customers in 2018 and produced £7.4 billion in revenue.

The proposal, which Fosun said was subject to due diligence and further talks, envisions that a significant amount of its external bank and bond debt will be converted into equity.

The firm said it is in advanced discussions with Chinese conglomerate Fosun over a £750 million cash injection, paving the way for a sale of its tour operator business.

Tourism is viewed as key to China's shift towards a more consumption-driven economic model from an investment and export-led one, but buyers like HNA Group and Fosun have faced scrutiny from Beijing for debt-fuelled, big-ticket foreign deals.

The news comes after a strategic review of Thomas Cook's airline business in February 2019.

Fosun said earlier this year that it will adopt an asset-light strategy and run under management contracts the Club Med resorts it plans to launch in China and other countries.