In a trading statement, the holiday firm said it needed "to restore the balance sheet to bring the company back to full and lasting financial health".

The holiday firm said it had started a process to identify options, but could not predict the effect on share value.

On 30 September 2003, the company's net liabilities were �673m.

This situation severely restricts the group's room for manoeuvre MyTravel statement See MyTravel's latest share price

"The UK business was in a worse state than we appreciated," the firm said.

"But the turnaround is well under way."

The firm has not yet clarified what form the restructuring will take, or whether it will include a debt-for-equity swap.

"This situation severely restricts the group's room for manoeuvre," the firm said.

"The form and terms of any restructuring and its effect on the value of the shares will depend on a number of factors and cannot be predicted with any certainty."

The company, formerly known as Airtours, said it was hoping to rebuild its financial position, even though its current financial arrangements are in place until mid-2006.

It added: "Although there is more to be done, we are ahead of schedule on delivering the cost savings and believe that they are now likely to exceed the target of �150m."

Profitable in 2005?

The board said it believed the group had made "significant progress" towards achieving a turnaround in trading performance.

It said although margins had been under pressure it had maintained an acceptable share of the market.

MyTravel said its first-half trading was in line with expectations, and also in line with its aim of returning to profitability in 2005.

In December, the tour operator, which was demoted from the FTSE all-share-index at the same time, announced a loss of �910.9m for 2003.

After Monday's AGM, stockbroker Brewin Dolphin said the likelihood of restructuring means shareholdings would be diluted, "leading to price decline", and stood by its earlier "reduce" recommendation.