Struggling tour operator Thomas Cook has posted details to shareholders of its proposed disposals which it says are vital to the continued existence of the company.
A meeting is to be held on May 29th at which shareholders will get to vote on the sale of Thomas Cook's interest in HCV to Iberostar, and the company's aircraft sale and leaseback agreements with Guggenheim Aviation Partners LLC and Aircastle Advisor (International) Limited.
Though shareholders are expected to support the proposed sales, company Chairman Frank Meysman laid it on thick when explaining why the board is so keen for the disposal resolutions to be passed, saying that the proceeds from the sales are essential to provide working capital for the group.
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In the event that shareholders do not give the thumbs-up to the disposals, the board would need to consider whether it was appropriate to report its interim results for the six months ended March 31st 2012 on a going concern basis, the circular states.
The group would have just 21 days from May 31st 2012 to make proposals acceptable to the majority lenders, whose continued support is necessary for the cash-strapped group to carry on operating.
Failure to make proposals accepted by the majority lenders would be an event of default under the amended banking facilities agreement that, if not waived, would result in the group's borrowings and the bonds becoming immediately due and payable, which would result in the company seeking the appointment of administrators.
Though audited figures are not yet available, the group reckons it made an operating loss of £262.7m in the six months to March 31st, compared to a loss of £165.8m the year before.
The unaudited net debt at March 31st 2012 was £1,389.9m, up from £1,094.2m a year earlier, reflecting the increased opening debt balance, higher seasonal losses and the impact that planned reductions in capacity have on booking receipts.
"Since early 2010, the group has been subject to a number of exceptional external shocks, most notably the closure of European airspace due to volcanic ash clouds in April 2010, and more recently the political and civil unrest in the important MENA [Middle East and North Africa] destinations, the combination of which, alongside the under-performance of the UK business, have significantly reduced the group's profitability and financial flexibility," Meysman said, explaining how the 171 year-old company came to be in this mess.
The group recently announced a strategic review in which it outlined its plans to turn around the fortunes of the business, but the circular makes clear that the board is unlikely to get the opportunity to put those plans into action if shareholders do not vote in favour of the resolutions.
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