Thomas Cook takes debt holiday

Cook plans to raise £425m of equity. Of that, £120m will come from a placing at 137p a share on 5 June, and the rest from a fully underwritten two-for-five rights issue at 76p a fortnight later. The theoretical ex-rights price is 120p. In addition, existing arrangements will be replaced with a new £691m bank facility and a €525m (£441m) bond. True, eurobonds aren't cheap and interest costs will remain largely unchanged this year. Still, they should fall after that and the importance of the refinancing cannot be underestimated. Net debt at end-March was still above £1.2bn and over £1.5bn in outstanding borrowing will fall due in 2015. Now, the new money will slice almost £400m off year-end net debt - £788m in 2012 - with maturities spread out between 2017 and 2020, giving valuable breathing space.

Crucially, trading has also improved Cook cut summer capacity by 7 per cent, but bookings, prices and gross margins are all up on last year, and 60 per cent of its summer holidays are already sold, leaving 10 per cent less to sell in the discounted "lates" market than in 2012. Underlying operating losses narrowed in the seasonally quieter first half to £198m, from £248m last year - or £58.7m better on a like-for-like basis - driven by the UK and continental Europe. Of that, £47m was cost savings and management has increased its target for restructuring benefits from £350m to £390m in 2015.

Broker Jefferies expects full-year adjusted EPS of 5.6p and 18.7p in 2014 on a pre-refinancing basis (from a 3.7p loss per share in 2012).