Thomas Cook edges towards new banking terms

10th Apr 2012 08:35

Struggling travel firm Thomas Cook has confirmed it is in talks with its bankers about extending its financing arrangements.The statement comes after weekend press speculation it would conclude a £1.2bn refinancing deal.The main problem for Thomas Cook has been a lack of customers taking package holidays to short haul destinations - the mainstay of its business.With middle class British customers thin on the ground, the company issued a series of profit warnings through 2011, culminating in a nerve shredding announcement in November that it was in danger of breaching its banking covenants.At that time the banks came through with £200m in emergency financing, and it now looks like a more permanent facility will be put in place.The problem for shareholders, who have seen their holdings drop 86% in the last 12 months, is that the banks may demand a stake in Thomas Cook in exchange for the new overdraft.It's also likely the company will pay higher interest rates than its sector peers as the banks extract a price for their mercy.BS