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UPDATE 1-Panel to rule on credit dispute key to Thomas Cook's future

(Adds details of bond and share prices, background)

LONDON, Sept 18 (Reuters) - A panel of bankers will rule on Thursday whether some investors in Thomas Cook's credit are due a payout under bankruptcy rules, a decision that could smooth a rescue of the world's oldest travel company.

The British firm, which employs 21,000 people across 16 countries, agreed the key terms of a rescue deal with Chinese shareholder Fosun last month. But it must be approved by creditors next week.

Holders of Credit Default Swaps (CDS), instruments used to insure exposure to credit, are digging in for a payout for their bets against the company.

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Following Thomas Cook's filing for Chapter 15 bankruptcy protection in the United States, Credit Derivatives Determinations Committees (DCs) have been asked to adjudge: "Has a Bankruptcy Credit Event occurred with respect to Thomas Cook Group PLC?"

If the answer is yes, it is likely to remove the risk of the CDS holders rejecting the restructuring plan next week in order to get paid.

"Some debtholders would simply try to block the vote for the rescue plan if they were not helped in activating the CDS," said an analyst at a European bank, who declined to be named.

Even if the DCs rule not to trigger the payout, however, Thomas Cook can decide to do so itself, according to regulatory filings.

Thomas Cook declined to comment, while the DCs, which are made up of representatives from big banks, were not immediately available for comment.

Chapter 15 is a technical process that Thomas Cook must undergo before its rescue plan is voted on. It does not involve a bankruptcy process of any kind in relation to Thomas Cook.

If the DCs deem there has not been a "Bankruptcy Credit Event", attention will turn to a meeting scheduled for Friday, Sept. 27, when creditors will vote on Thomas Cook's rescue plan. A court date to approve the plan is scheduled for Sept 30.

If creditors vote to reject the plan, that would leave the firm scrabbling to secure its future by early October and the off-peak winter season, when cash reserves are low.

The creditor meeting, originally expected to take place on Sept. 18, was rescheduled on Monday "as part of the process to finalise the full commercial terms between Thomas Cook Group's creditors and stakeholders."

Thomas Cook's 2022 euro-denominated bonds were last indicated at just over 10 cents in the euro, according to Tradeweb. Latest CDS pricing indicates an implied probability of default on Thomas Cook of 96%, data from IHS Markit showed on Wednesday.

The company's shares closed at 4.5 pence, down 97.6% from highs hit in March 2014.

Thomas Cook has struggled with intense competition in popular destinations, high debt levels and an unusually hot summer in 2018, which reduced its last-minute bookings

Under the terms of its rescue deal, Fosun - whose Chinese parent owns all-inclusive holiday firm Club Med - will contribute 450 million pounds of new money in return for at least 75% of Travel Cook's tour operator business and 25% of its airline.

Thomas Cook's lending banks and bondholders will stump up a further 450 million pounds and convert their existing debt to equity, giving them in total about 75% of the airline and up to 25% in the tour operator business.

(Reporting by Alistair Smout, Karin Strohecker and Josephine Mason in London and Danilo Masoni in Milan; Editing by Mark Potter)