* Firm hit with demand from lenders for underwritten funds
* Fosun and banks working on recapitalisation plan
* Oldest travel company has 600,000 customers currently on
holiday
* Government bill for collapse could reach 600 mln stg
(Adds Fosun comment, CDS pricing, additional source comments)
By Alistair Smout
LONDON, Sept 20 (Reuters) - Britain's Thomas Cook
urgently needs 200 million pounds ($251 million) to satisfy its
lenders or one of the world's oldest holiday company's could
collapse in the next few days, potentially leaving hundreds of
thousands of holidaymakers stranded.
The pioneer of the package holiday agreed key terms of a 900
million pound recapitalisation plan last month with Chinese
shareholder Fosun and the travel firm's banks,
significantly diluting existing shareholders.
But the firm released a statement on Friday saying a
last-minute demand for additional funding puts that deal at
risk.
Thomas Cook employs 21,000 staff and has 600,000 customers
currently on holiday, mostly from Germany, Britain and
Scandinavia.
A source familiar with the negotiations said the company had
"a matter of days" to find a solution. Shares in the company hit
a record low of 2 pence following the statement, down 15 percent
on the day.
Lenders are demanding another 200 million pounds in
underwritten funds to support Thomas Cook through its winter
trading period, when cash is usually running low.
"Discussions to agree final terms on the recapitalisation
and reorganisation of the company are continuing," Thomas Cook
said.
"These discussions include a recent request for a seasonal
standby facility of 200 million pounds, on top of the previously
announced 900 million pounds injection of new capital."
Thomas Cook said the recapitalisation posed "a significant
risk of no recovery" for the diluted shareholders.
Thomas Cook has struggled with competition in popular
destinations, high debt levels and an unusually hot summer in
2018 which reduced last-minute bookings.
The firm has 1.7 billion pounds of debt.
Latest Credit Default Swap (CDS) pricing indicates an
implied probability of default on Thomas Cook of 100%, data from
IHS Markit showed, and a decision on whether investors who used
the instrument to bet against the company are due a payout has
been delayed until at least Monday.
A source close to the discussions said on Thursday that
Royal Bank of Scotland (RBS) had hit Thomas Cook with a
last minute demand for the extra funding, adding that the
situation "was becoming more critical".
A spokesman for RBS said the bank did not "recognise this
characterisation of events" and was working with all parties to
"try and find a resolution to the funding and liquidity
shortfall at Thomas Cook".
Under original terms of the plan, Fosun - whose Chinese
parent owns all-inclusive holiday firm Club Med - would
contribute 450 million pounds ($552 million) of new money in
return for at least 75% of the tour operator business and 25% of
the group's airline.
"Our proposed contribution of £450m has not changed
throughout this process," a spokesman for Fosun Tourism Group
said.
"As a minority investor in Thomas Cook Group plc, and with
no Board representation, we are still working tirelessly with a
large number of other stakeholders and interested parties to
find agreement on the Company’s proposed recapitalisation plan."
Thomas Cook's lending banks and bondholders were to stump up
a further 450 million pounds under the plan and convert their
existing debt to equity, giving them in total about 75% of the
airline and up to 25% in the tour operator business, the group
said.
GET A GRIP
If that deal is not finalised before a creditor vote on
Sept. 27, then holidaymakers could be facing the second major
collapse of a tour operator in as many years, after the failure
of Monarch in 2017.
When Monarch collapsed, the British government repatriated
all customers abroad, both those with package holiday protection
from Air Travel Organisers' Licensing (ATOL) and flight-only
passengers who were not protected.
If Britain does the same for Thomas Cook's customers, then
160,000 Britons would need repatriation, eclipsing the number
brought home after Monarch's collapse. A source familiar with
the matter said that Britain's Civil Aviation Authority (CAA)
was making contingency plans and the bill for the government
could reach 600 million pounds.
A spokesman for the Department for Transport declined to say
if there were plans for a repatriation effort. Asked about
Thomas Cook, he said: "We do not speculate on the financial
situation of individual businesses."
British pilot union BALPA, whose members have previously
gone on strike in a disagreement over pay with Thomas Cook's
management, have supported the restructuring and urged the banks
and government to support the travel group.
"If Thomas Cook goes into administration it will cost the
taxpayer as much to repatriate holidaymakers as it would cost to
save Thomas Cook," General Secretary Brian Strutton said in a
statement.
"The government sat on the sidelines wringing its hands when
Monarch Airlines was let down by its financiers, this time
government needs to get a grip and do its bit to save Thomas
Cook."
($1 = 0.7953 pounds)
(Reporting by Alistair Smout; additional reporting and graphics
by Josephine Mason;
Editing by Edmund Blair and Elaine Hardcastle)
