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Thomas Cook seeks to borrow £400m to stave off cash crunch

Thomas Cook is in talks with its banks to borrow £400m to stave off the threat of a cash crunch that could hit next winter. The tour operator is understood to be in the advanced stages of talks with its banking syndicate after asking the lenders for a new revolving credit facility to help strengthen its balance sheet.

It hopes to secure the funding before announcing half-year results on 16 May, at which its auditor Ernst & Young might otherwise be forced to express doubts about its ability to continue as a going concern.

The talks, first reported by Sky News, are aimed at providing a cash cushion to tide the company over the winter period, when tour operators’ cash reserves tend to run low because holidaymakers typically book earlier in the year.

A delay in the timing of Brexit, now scheduled for October, has helped the company by avoiding any disruption during the key summer period for bookings.

But Thomas Cook remains under pressure from long-term trends affecting traditional tour operators, which own costly bricks-and-mortar stores despite the tendency of holidaymakers to book online.

In a statement to the stock market, Thomas Cook said: “Looking ahead to winter 2019-20, we have taken the proactive step of engaging in discussions with our lending banks now to ensure we have both the financial flexibility necessary to maintain an appropriate liquidity buffer through the winter, and also the ability to continue to invest in our strategy of growth.”

The chief executive, Peter Fankhauser, said: “We have taken a number of prudent early steps to de-risk our business by taking out capacity in a challenging consumer environment. We have also taken the proactive step to approach our financing partners and are engaged in constructive discussions to ensure we have the flexibility and resources to continue investing behind our plans over the long term.”

The price of Thomas Cook’s bonds fell sharply this week as investors offloaded debt, indicating concern about the firm’s ability to pay it back.

Thomas Cook’s financial position is complicated by uncertainty over the timing and feasibility of plans to sell its airline division.

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