Beleaguered Thomas Cook agrees credit extension deal

Thomas Cook gave its long-suffering shareholders some positive news yesterday with the announcement that it had extended its banking facilities under more favourable terms.

The tour operator, which shocked the market last week with a third profit warning this year, said it had extended its secured banking agreement for a further year, taking it to May 2014.

The company has a 200 million loan and an 850m revolving credit facility with a range of bankers, who were not named. It added that it would pay reduced interest with immediate effect.

The loan will now be charged at 2.25 per cent over the Libor bank rate, and on the revolving credit facility the rate will be between 2 per cent and 2.5 per cent above Libor, depending on the proportion of the facility that is drawn. The margin was previously 2.75 per cent for both facilities.

But chief financial officer Paul Hollingworth said the company still planned to reduce its overall debt.

"We have a number of initiatives under way to deliver progress on this, including the disposal of certain hotel and surplus assets," he said.

Analysts believe the company is preparing to sell off at least 200m worth of assets to reduce its debt. The group is reportedly seeking buyers for several hotels and a European office, as well as its stake in the air traffic control service Nats.

Shares in Thomas Cook slumped last week after the firm said full-year profits would be some 60m less than previously expected.

It said its profit margins in the UK were under pressure from rising oil costs, which are making it more expensive to fly, while unrest in North Africa and the Middle East was also having a continuing impact on bookings.

The firm launched a "fundamental" review of its UK business.

Shares rose moderately yesterday morning but fell back again to close at a year low of 67p.