MyTravel is set to wipe out its debt burden

MyTravel is planning an �800m ($1.4bn) debt-for-equity swap, which will virtually wipe out the firm's debts.

The company, which used to be called Airtours, ran up massive debts after an unsuccessful expansion drive.

However, MyTravel said it was set to break even at the operating level in the financial year to 30 September.

Drastic action

The firm had invested heavily in expanding its services, but suffered heavily from the post-September 11 downturn in travel.

The slump left the firm with high costs and many unsold holidays, although it has sought to cut expenses by shedding thousands of jobs and selling businesses.

The company warned last month that its planned restructuring would lead to a "significant dilution for existing holders of equity and bonds".

On Wednesday, it spelled out the details of the deal, saying the restructuring would lead to the conversion of �800m of debt into equity.

Once the swap is completed, creditors will hold 88% of the firm's shares. Bondholders will get 8%, leaving shareholders with 4%.

Following the swap, MyTravel said it would be left with debts of �140m in aircraft finance leases.