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Thomas Cook shares bounce higher as talk of a possible fund-raise fades, vague Chinese interest chatter

In spite of the rally, Thomas Cook’s demotion from the FTSE 250 index is likely to be confirmed in the latest quarterly indexes reshuffle due to be announced after the London market close on Wednesday, with the changes based on Tuesday’s closing prices
Thomas Cook
Analysts at US broker Jefferies International said they did not expect Thomas Cook to need new equity despite its debt problems

Thomas Cook PLC (LON:TCG) saw its shares bounce higher on Wednesday, recovering after its recent sell-off on debt mountain worries as talk of a possible fund-raising faded and vague rumours of possible Chinese interest in the tour operator also put a floor under the troubled shares.

Around 3.40pm, the FTSE 250-listed firm’s stock was almost 40% higher at 31.78p, albeit a recovery from lows, having suffered a near 60% drop over the past five sessions since the group issued a profit warning last Tuesday.

READ: Thomas Cook confirms 'disappointing' full-year earnings and turnaround plan

However, in spite of the rally, Thomas Cook’s demotion from the FTSE 250 index is likely to be confirmed in the latest quarterly indexes reshuffle due to be announced after the London market close on Wednesday, with the changes based on Tuesday’s closing prices.

The tour operator’s shares hit fresh six-year lows on Wednesday as the cost of insuring debt issued by the firm against default reached another record high, despite its efforts to reassure investors over its £389mln debt mountain.

Thomas Cook’s bonds hit a record low after credit rating agency Moody’s cut its stance on the company’s debt to B2 from B1.

The 177-year-old travel company scrapped its dividend last week and blamed a “disappointing” year on the prolonged summer heatwave across Europe, which meant people delayed their bookings, especially in the UK.

Capital raise can be avoided

However, in a note to clients today, analysts at US broker Jefferies International said they did not expect Thomas Cook to need new equity despite its debt problems.

They said: “Although we acknowledge the risk, our central thesis is that Thomas Cook can avoid a capital raise.”

Meanwhile, some commentators also pointed out that Chinese billionaire Guo Guangchang could be looking closely at the UK travel firm’s situation, given that conglomerate Fosun International, which is part of his Shanghai-based group has a 12% stake in Thomas Cook.

Earlier this year, Fosun won approval from the Hong Kong stock exchange to spin off its tourism and hotels unit that includes French travel firm Club Med as it seeks to expand its travel business globally.

The company also has a joint venture with Thomas Cook Group in China.

Notification of director share buying on 4 December also provided support, with Thomas Cook's chairman Frank Meysman acquiring 373,000 shares at a price of  21.5561p each, while another non-executive director, Lesley Knox bought 208,778 shares at an aggregate price of 22.60p each.

 -- Adds director share buying; updates share price --

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