Thomas Cook was close to collapsing into administration tonight as eleventh hour talks with its lenders looked set to end in failure.
The company’s creditors and the government were tonight anticipating that the world’s oldest travel operator would announce it was ceasing trading tomorrow, Sky News reported.
Big Four accountancy firm KPMG was tonight being lined up to oversee the administration of the travel firm’s UK tour operating business, which includes around 550 high street stores.
Restructuring adviser Alix Partners is expected to handle any insolvency process for the company’s airline division.
Thomas Cook’s management made a plea to its creditors to slash their demands during crunch negotiations throughout the weekend.
Company bosses are set to update the City before the market opens tomorrow on whether or not the firm has secured a rescue deal to avoid an administration that would affect 150,000 UK holidaymakers and put 9,000 British jobs at risk.
The 178-year-old holiday giant had been rushing to find an additional £200m after banks – including the state-owned RBS – demanded contingency funds for the upcoming winter season, during which business is typically flat and cash is low for holiday companies.
Lenders had been asked by Thomas Cook to cut the standby funding they require, according to Sky News, which reported that executives met yesterday at the offices of law firm Latham & Watkins.
Credit card firms had also been asked to release £50m of cash they were holding as collateral against Thomas Cook.
If the company does cease trading, the collapse is expected to spark Britain’s biggest-ever peacetime repatriation operation. There are approximately 600,000 Thomas Cook customers currently on holiday with the company, of whom around a quarter are British.
Foreign secretary Dominic Raab today promised Thomas Cook customers that they will not be stranded abroad if the embattled holiday firm collapses.
Raab also downplayed the prospect of a government bailout which union bosses have been calling for in recent weeks.
Ministers did not “systematically step in” when businesses went under unless there was “a good strategic national interest”, he told the BBC.
Some customers on holidays abroad have been expressing frustration over the operator’s troubles, with one group at a hotel in Tunisia saying that they were not allowed to leave the property until they paid extra fees to compensate for what the hotel was owed by Thomas Cook.
The extra £200m in funds demanded by the syndicate of banks has taken the total size of the rescue package to roughly £1.1bn.
Shares in Thomas Cook have crashed over 90 per cent in the last year, with the firm reporting a £1.5bn loss for the first half of 2019.
In a damning note released in May, Citigroup analysts warned that the firm’s shares were “worthless” and that its outlook was “significantly weaker than expected”.
The Department for Transport and the Civil Aviation Authority are said to have drawn up plans to bring home passengers as part of the potential emergency repatriation operation.
Thomas Cook boss Peter Fankhauser was tight-lipped as he left the crunch City talks late this afternoon.