Thomas Cook has filed for bankruptcy protection in the US to stop lawsuits from creditors
THOMAS Cook has filed for bankruptcy protection to avoid lawsuits by creditors in the US. It comes amid a £900 million deal Thomas Cook is seeking to rescue the company. The travel firm filed for Chapter 15 court protection in the Southern District of New York, according to Travel Weekly. Represented by law firm Latham […]
THOMAS Cook has filed for bankruptcy protection to avoid lawsuits by creditors in the US.
It comes amid a £900 million deal Thomas Cook is seeking to rescue the company.
The travel firm filed for Chapter 15 court protection in the Southern District of New York, according to Travel Weekly.
Represented by law firm Latham & Watkins, this law falls under the US Bankruptcy legislation.
It protects foreign companies from US lawsuits, meaning Thomas Cook can continue working on a deal.
It also “triggers the payout of default insurance for a group of bondholders” and allows the company to use the US bonds as part of the restructuring plans.
Meetings between Thomas Cook and lenders has been pushed back to the end of September to organise more time to come to a deal.
The tour operator currently serves 22 million customers – 480,000 who are flight-only passengers who would not be protected if the rescue deal would fail.
Why does Thomas Cook need a rescue deal?
In May this year, Thomas Cook issued a profit warning that saw the value of its shares tumble.
The company reported a £1.5 billion loss for the first half of 2019, after a goodwill write-off of £1.1 billion, leaving it with debts of around £1.25 billion.
Thomas Cook boss Peter Fankhauser blamed Brexit uncertainty and last year’s heatwave for the downturn in business.
It’s hoped that the rescue deal would help the company turn its prospects around.
How much does Thomas Cook need and where is the money coming from?
Thomas Cook needs £900 million to secure its future – £750 million of this was announced when the company said it would need to restructure and it asked for a further £150 million to see it through the winter season.
The company announced in August that it was planning to sell parts of its business to Chinese firm Fosun, which is already the company’s largest shareholder.
The Chinese firm said it will contribute £450 million of new money to the UK travel firm, and buy 75 per cent of the company’s tour operator business and 25 per cent of its embattled airline business.
The remaining £450 million will come from group lenders and bondholders.
We explain everything you need to know if you have booked or are booking a holiday with Thomas Cook.
If you have booked a holiday package then you are ATOL-protected if the firm goes bust.
Flight-only travellers are not, and would need to claim through insurance or your credit card.
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UK aviation watchdog, the Civil Aviation Authority (CAA,) could need to make alternative plans if the travel firm goes into administration.
Thomas Cook are ATOL-protected, meaning Brits would be repatriated or refunded if their bookings are affected.
Thomas Cook declined to issue a statement.