Thomas Cook has filed for bankruptcy protection in the US to stop lawsuits from creditors
THOMAS Cook has filed for bankruptcy protection to avoid lawsuits by creditors in the US.
It comes as the travel firm is in the final stages of hammering out a rescue deal.
The travel firm's lawyers Latham & Watkins filed for Chapter 15 court protection under US bankruptcy legislation with the Southern District of New York, .
It protects foreign companies from US lawsuits, and in this case it means Thomas Cook can continue working on its rescue deal and is a vital part of the process.
Chapter 15 also "triggers the payout of default insurance for a group of bondholders" who could vote against the deal according to Travel Weekly.
Thomas Cook is in the final stages of securing its rescue deal.
A stakeholders' vote on the deal was pushed back to the end of September just days ago to give the travel firm more time.
The tour operator currently serves 22 million customers a year.
There are 480,000 customers due to travel in October who are "unbonded" according to Travel Weekly, and who would not be protected under Atol if the rescue deal falls through.
Flight-only travellers would need to claim through insurance or credit card.
If you have booked a package holiday then you are ATOL-protected if the firm goes bust.
A-TOLD YA What ATOL protection means and why you should make sure you have it when booking your holiday
Why does Thomas Cook need a rescue deal?
In May this year, Thomas Cook issued a profit warning that saw the value of its shares tumble.
The company reported a £1.5 billion loss for the first half of 2019, after a goodwill write-off of £1.1 billion, leaving it with debts of around £1.25 billion.
Thomas Cook boss Peter Fankhauser blamed Brexit uncertainty and last year's heatwave for the downturn in business.
It's hoped that the rescue deal would help the company turn its prospects around.
How much does Thomas Cook need and where is the money coming from?
Thomas Cook needs £900 million to secure its future - £750 million of this was announced when the company said it would need to restructure and it asked for a further £150 million to see it through the winter season.
The company announced in August that it was planning to sell parts of its business to Chinese firm Fosun, which is already the company's largest shareholder.
The Chinese firm said it will contribute £450 million of new money to the UK travel firm, and buy 75 per cent of the company's tour operator business and 25 per cent of its embattled airline business.
The remaining £450 million will come from group lenders and bondholders.
We explain everything you need to know if you have booked or are booking a holiday with Thomas Cook.
Most read in travel
UK aviation watchdog, the Civil Aviation Authority (CAA,) could need to make alternative plans if the travel firm goes into administration.
Having Atol protection means Brits would be repatriated or refunded if their bookings are affected.
Thomas Cook declined to issue a statement.