Thomas Cook Shares Plummet Over Financing Worries

Shares of Thomas Cook Group have nearly collapsed over fears of the financial future of the British-based tour operator, citing deteriorating trading and a weakened cash position.

As of 9:45 a.m. (New York time), Thomas Cook shares trading in London under the symbol TCG.L have plummeted more than 73 percent in the session.

Earlier on Tuesday, the struggling firm confirmed that it has entered into talks with banks over how much money it can borrow.

"The company is in discussions with its principal lending banks with regard to its facilities during the seasonal low period of cash in the business," Thomas Cook said in a statement.

"While the company currently remains in compliance with its financing covenants, it also intends to seek agreement from its lending banks to adjustments that will improve its resilience if trading conditions remain difficult."

The Daily Telegraph newspaper of Britain reported that Paul Hollingworth, the company’s finance director, said Thomas Cook was seeking to borrow about £100-million ($157-million) to carry it over the December period. Thomas Cook already received a short-term credit line for an identical amount in October.

"It's a combination of the trading and its impact on our cash position making covenants tighter. The sensible, prudent thing for the company to do is enter into these discussions with the lenders and make sure we get the additional liquidity," Hollingworth told reporters.

Thomas Cook’s bookings have been hurt by continued violence and political turmoil in the Middle East, particularly Tunisia and Egypt, which are popular destinations for European travelers. The floods in Thailand, another coveted holiday destination for Europeans, have also hurt the bottom line.

According to reports, Thomas Cook had net debt of about £900-million ($1.4 billion) at the end of September.

The holiday group has suffered through a difficult year, having already posted several profit warnings, suspending a dividend and witnessing the resignation of a long-time former chief executive.

Over the weekend, the firm said it may close up to 200 of its 1,200 travel agencies and bureaux des change.

Year-to-date, company shares have plunged about 93 percent.

Thomas Cook also said it will postpone releasing its full-year results (which were scheduled for Tuesday) until its negotiations with banks have been completed.

Kevin Peachey, BBC’s personal finance reporter, wrote that the company’s financial problems should not cause any concerns for vacationers who have arranged their holidays through Thomas Cook.

“Anyone booked for an overseas package holiday with Thomas Cook is covered under the Air Travel Organizers’ Licensing scheme,” he said.

“This means that even in the worst case scenario -- that the company goes bust when holidaymakers are away -- customers on package deals are flown home without incurring extra expense. Those who have not already left for their holiday are refunded. Holiday bookings should also be honored if there is a takeover.”