This article is more than 1 year old

This article is more than 1 year old

The future of Thomas Cook is hanging in the balance as the travel company scrambles to raise an additional £200m to secure an emergency rescue deal.

Britain’s oldest package-holiday firm must secure the funds before a crucial meeting next Friday after a last-minute demand from its lenders, which include about 10 banks led by RBS, Barclays and Lloyds.

In the past fortnight, the banks told Thomas Cook it needed the extra money as a contingency to see it through the winter, on top of a £900m package that was close to being finalised.

If the company cannot secure the extra funding it risks going bust, triggering what would be the UK’s biggest repatriation in peacetime. The Civil Aviation Authority (CAA), the government-backed aviation regulator, would be forced to pick up the estimated £600m cost of bringing home 150,000 Britons overseas on the group’s holiday packages.

Thomas Cook, which employs 20,000 staff including about 9,000 in the UK, is battling to secure the terms of a complex refinancing agreement, which involves the Chinese conglomerate Fosun, its lenders and bondholders.

Tough competition from online rivals, as well as one-off factors such as Brexit, have weighed on the company’s recovery after its near-collapse in 2011. High prices of jet fuel and hotels have also pushed up costs, while last summer’s heatwave convinced potential customers to stay at home, which further affected earnings.

In August the company published details of the planned restructure, which included a £450m cash injection from Fosun International in return for a majority stake in Thomas Cook’s tour-operating business and a stake in its airline. The Club Med owner first invested in Thomas Cook in 2015 and is building some of its hotels in China as part of a joint venture.

Under the deal, lenders are being asked to write off more than £1.7bn of debt in return for a stake in the business. Existing shareholders are being wiped out in the deal.

A vote on that process takes place on 27 September. That crunch vote was delayed earlier this week to give the stricken tour operator more time to smooth out obstacles to its rescue package.

Quick guide The history of Thomas Cook Show Hide Thomas Cook owes its name to a humble and deeply religious 32-year-old cabinet-maker who, one June morning in 1841, hiked the 15 miles from his home in Market Harborough to Leicester, to attend a temperance meeting. The former Baptist preacher believed that the ills of Victorian society stemmed largely from alcohol and, presumably fatigued from his walk, realised he could deploy the power of Britain’s flourishing rail network to help spread the word. Addressing the temperance meeting, he suggested that a train be hired to carry the movement’s supporters to the next meeting in Loughborough. Thus, on 5 July 1841, some 500 passengers travelled by a special train for the 24-mile round trip, paying a shilling apiece. Over the next few years, Cook laid on ever more trains, introducing thousands of Britons to train travel for the first time. The first such outing to be run for commercial purposes was a trip to Liverpool in 1845. Over the next decade or so, the business expanded to offer overseas trips, to France, Switzerland, Italy and beyond, to the US, Egypt and India. His more business-minded son John expanded the tour operator and its reach was such that the government enlisted its expertise in an effort, ultimately in vain, to relieve General Gordon at the siege of Khartoum in 1885. John’s three sons inherited the business, which incorporated as Thos Cook & Son Ltd in 1924 and benefited from the increasing ease of international travel. Its first flirtation with collapse came during the second world war, when the government requisitioned some of its assets and it was sold to Britain’s railway companies, effectively a nationalisation. But it boomed in the postwar years as growing prosperity fuelled the appetite for holidays and it returned to private ownership in 1972. Since then, it has changed hands and changed shape via a series of mergers and takeovers. It nearly collapsed in 2011 but averted its demise with a bailout deal funded by banks. Now, after 178 years of operation, it has ceased trading.

In court filings seen by Sky News last week, Thomas Cook said it was running out of cash and needed to finalise the deal quickly. “The serious liquidity issues within the group have led to an urgent need to complete any restructuring within September,” it said.

Thomas Cook said the £900m would be enough to help the company avoid bankruptcy as it heads into winter, when holiday bookings are at their lowest. But its lenders have decided the company needs extra contingency funding to keep it going through the quiet trading period.

The company is understood to be in talks with a number of potential parties about the £200m funding, which could take the form of a loan or cash injection. The company needs to secure assurance that funds will be forthcoming in the next few days or administrators will be called in.

Thomas Cook must secure some form of new funding by October because it has to pay hoteliers and other suppliers.

The 178-year-old global travel group also needs to persuade the CAA, which administers the Air Travel Organiser’s Licence (Atol) scheme covering travel companies, that it should renew its licence at the end of this month for another 12 months.

The company is understood to be considering a number of alternative options in case its Fosun-backed deal collapses. These include the sale of its Nordic airline and tour operator to Triton, a private equity firm.

Thomas Cook’s share price has dived more than 90% in the last year to just 4.5pand the company is now valued at less than £70m.

The CAA declined to comment.