Thomas Cook shareholders and its pension fund could lose out under the terms of a proposed £900 million rescue deal.
The travel giant is in crucial talks with Chinese investor Fosun over the terms of the deal that would see it inject £450 million while banks and lenders match that with a debt for equity swap.
Weekend reports said the firm’s pension scheme has demanded terms to sweeten the deal that would guarantee the continuation existing annual contributions of £25 million.
Podcast: Thomas Cook rescue deal
However, Sky News reported that the terms being demanded by the pension fund trustees, also including equity in the new business, have been described as “ludicrous” by an insider.
It was reported that the issues were discussed as a meeting earlier last week involving the Pensions Regulator at which pension fund trustees argued that it should remain fully funded.
Trustees were said to have appointed accountancy firm Grant Thornton and public relations firm Smithfield to advise them.
It was also reported that the Fosun rescue will mean the ending of Thomas Cook’s public stock market listing, meaning shareholders are likely to lose their investments in the company.
The Times says Thomas Cook’s board is in favour of leaving its shareholders with some equity to ensure the deal is approved, but reported a source told it the chances of this happening was “almost zero”.
Due to European rules governing foreign ownership of airlines, the deal would see Fosun take a 75% stake in Thomas Cook’s tour operating and hotel division and 25% stake in its airlines.
Thomas Cook told Sky News that it was committed to finding a solution for shareholders but the rescue deal needs to be completed by early October if Thomas Cook is to be able to pay key suppliers.
The firm is also scheduled to renew its Atol licence at the end of September. Details of the rescue deal are expected to be decided at a crucial board meeting next Wednesday.