MyTravel can relax a bit if it cuts its debt burden

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

In October, MyTravel put forward a deal to restructure �800m ($1.47bn) of its debt through an equity swap which would leave bondholders with 8% of the firm.

Failure to approve the plan could see that stake slashed to 2%, it warned.

Creditors will then hold 88% of the firm's shares, bondholders will get 8% and shareholders will be left with just 4%.

Contingency

MyTravel said there were signs of an agreement to the proposed swap from banks, but it was putting a contingency plan in place should it fail to secure bondholder backing by 17 November.

A consensual backing of the deal before that date would secure bondholders with an 8% stake, but if not enough of them back the deal by 17 November that stake will be cut to 4%.

Their stake will be reduced even further, to 2%, if the company initiates a court procedure - known as a 'scheme of arrangement' - which will transfer the equity and debt of the existing company into a new company.

Under the rules of the scheme, the new firm would only require backing for its plans from shareholders and creditors, but not bondholders.

An expansion drive and accounting errors led to heavy debts for MyTravel, which also suffered heavily from the post-September 11 downturn in travel.

The slump left the firm with high costs and many unsold holidays, and despite efforts to cut expenses by shedding thousands of jobs and selling businesses its debt mountain has grown.