Thomas Cook shares leap as more debt secured

Shares in British travel provider Thomas Cook (TCG.L) soared as it secured an additional £100 million in credit to strengthen its balance sheet ahead of December's seasonal low.

The company was one of the top gainers on the FTSE 250 index in morning trade, with shares gaining 9p, or 19.9%, to 54.6p.  

However, the move will do little to realise its stated intention to reduce its debt burden over the next two to three years.  

Borrowings are high and are estimated to peak at £1.4 billion to £1.5 billion by the end of the year, in stark contrast to the company’s top-line profits of about £315 million, according to the Guardian.

Last year’s trade was affected by the political uprising in North Africa, and although operating profits were in line with expectations the company’s dividend was scrapped to save £90 million.

Karl Burns, analyst at Shore Capital, said: ‘We believe today’s announcement is likely to be taken well, given the main concern surrounding Thomas Cook was the group’s ability to staying within its banking covenants in December 2011 and beyond.’

This comes in addition to the group’s existing £150 million loan and £850 million revolving credit facility, which are due to mature in May 2014.

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Home Retail Group (HOME.L) inched up 0.40p, or 0.40%, to 103.8p as buyers snapped up the cheap stocks after they plunged almost 20% earlier this week.

The group’s mid-year results showed a whopping 72% reduction in operating profits to £27 million as sales at its Argos and Homebase stores felt the squeeze                                                       

David Jeary, analyst at Investec Secutities, noted: ‘The declining profitability of Argos is now the result of structural decline rather than cyclical pressures. While the weak consumer backdrop does not help matters, there does not appear to be a Plan B at this stage.’

Aggreko (AGK.L) slipped 15p, or 0.88%, to £16.89 as analysts put the company share price on ‘hold’ with expectations that future growth would level out.