MyTravel under threat to lose trading licence
Terry Macalister
Monday November 15, 2004
The Guardian
MyTravel, Britain's biggest tour operator, will admit for the first time today that it will lose its trading licence from the Civil Aviation Authority unless bondholders give consent to an £800m restructuring.
The danger of the regulator pulling the plug on flights and holidays will be contained in a circular sent to rebels such as fund manager Fidelity, which has opposed the rescue plan.
MyTravel has been in turmoil for almost two years since it warned of a £50m black hole in the accounts which eventually led to the exit of the founder and chairman, David Crossland and chief executive Tim Byrne.
MyTravel made a £365m loss in 2003, but last October announced a debt-for-equity plan it argues will put the company on a sound footing.
Bondholders have complained, however, that they have not been properly consulted on the terms of the deal, which would leave them with only 8% of the restructured business. A further 4% would be left with shareholders, while 88% would go to the creditor banks led by Royal Bank of Scotland.
MyTravel declined to comment last night on the publication date of the circular or any of its contents.
"The board believes - and has made clear since March - it is necessary to restructure the balance sheet," was all a spokeswoman for MyTravel was willing to say.
But well-placed sources confirmed the circular was ready to be distributed this morning and would warn about the threat from the CAA, which is poised to undertake an annual review of MyTravel.
The company, which offers holidays under a series of different names, hopes to head off any early intervention from the regulator by telling bondholders it will go to court if it does not have their irrevocable support by Wednesday. If necessary, MyTravel would make an application to the high court on November 18 and ask for a "scheme of arrangement" to be put in place.
Under this, the court would convene a meeting for shareholders and creditors where it would call them to vote on what amounts to an even more punitive ownership structure. This would leave bondholders with only 2% of the company, formerly known as Airtours.
Shares in MyTravel rose by more than 7% to 4p last Friday amid expectation that the bondholders would agree the offer - rather than seeing their potential holding diluted further.
Paradoxically the latest crisis comes as MyTravel has recovered some of its financial strength. This is partly because costs have been cut drastically through redundancies and the sale of certain business.
City analysts had been pencilling in operating losses of £100m for the 12 months to the end of September 2004.
But chief executive Peter McHugh said earlier in September he believed it would hit breakeven, helped by booming demand in Scandinavia for holidays in the sun after a wet domestic summer.
There was also an improvement in the British side of the business which has started to make profits after a tough start to the year.