A crunch meeting due to take place today to potentially clear the way for Thomas Cook to get its £1 billion rescue deal over the line has been delayed.
The meeting of the Credit Derivatives Determinations Committee, which should have taken place at noon, has been postponed until midday on Monday.
It follows Thomas Cook’s decision to file for Chapter 15 bankruptcy protection in the US.
The Committee will decide whether the filing indicates that a ‘bankruptcy credit event’ has occurred and, if so, this could trigger default insurance payments.
This is crucial because, according to reports, holders of Thomas Cook Credit Default Swaps are threatening to block the company’s plan to raise an additional £900 million in borrowing because it could leave them with nothing.
Why is this the case?
The financial restructuring deal on the table would involve Thomas Cook’s major shareholder, Chinese investor Fosun, pumping a further £450 million into the business in exchange for 75% of the tour operator and 25% of Thomas Cook Airlines.
The company would raise a further £450 million from existing debtholders and its bankers, who would then take control of the airline and own up to 25% of the tour operator.
However, in addition, they would write off £1.7 billion of debt, which would leave no debt to insure, hence the threats by the holders of the Credit Default Swaps to block the move.
How could today’s meeting help?
If it is decided that a bankruptcy credit event has occurred, this could trigger payouts for the holders of the Credit Default Swaps, removing their need to block the refinancing package.
Will this guarantee the rescue deal will go ahead?
Sky News claimed last week that Thomas Cook needs to raise a further £100 million to satisfy its creditors that it has enough cash to see it through the winter. The operator has not confirmed these reports.
The company was due to hold a creditor’s meeting to vote on its proposed rescue deal this week, but it has now delayed the meeting until September 27, three days before the deadline for renewing its ATOL.