MyTravel can relax a bit if it cuts its debt burden

The London High Court said on Wednesday that the firm could exclude bondholders from its plans to restructure �800m ($1.47bn) of its debt.

Bondholders oppose the firm's plan for an equity swap, which would leave them with an 8% stake.

MyTravel returns to court on 20 December to have the restructuring scheme finalised.

Failed ambitions

MyTravel had earlier said that a shareholder meeting, which will exclude bondholders, will now be held in December and the restructuring should be in place by the end of the year.

However, the court needs to give final approval of the restructuring plan before it can take place. The initial draft of the scheme was rejected by the court on a technicality and the company had to submit a new plan.

The court has vindicated the company's decision to pursue the scheme of arrangement MyTravel Q&A: MyTravel's crisis

"The court has vindicated the company's decision to pursue the scheme of arrangement," the company said in an earlier statement.

But the bondholders, who plan to appeal the court's ruling, disputed the company's version of events.

"The Committee disputes the judge's finding that bondholders have no present interest in the company's assets, and does not consider that the company can lawfully dispose of all its assets without making provision for the claims of bondholders," said a statement on behalf of the Ad Hoc Convertible Bondholder Committee.

MyTravel has offered the bondholders an 8% stake in the restructured company, with shareholders getting 4% and the rest - 88% - for its lenders.

The company, which raked up huge debts after an unsuccessful expansion drive, had earlier warned the bondholders that it may halve their stake to 4% if forced to seek permission for the scheme from the courts.

Its bondholders, including Fidelity, Societe Generale, Lehman Brothers, and New Star Asset Management, have argued that MyTravel does not have the legal right to take such action.

In addition to its failed expansion efforts, MyTravel was also hit by accountancy errors, and 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.