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Condor Airlines

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Hi, new to this so unsure if I'm posting correctly!

I had flights booked with Condor to Kuala Lumpur. This being a stop off en route to Australia where I plan to spend a couple of months.
Due to the Thomas Cook problems, Condor have had to re arrange my flights.
They have brought forward my first flight from Manchester to Frankfurt by more than 12 hours (I cannot depart a day earlier) and they have added an extra stop to the journey, this an inconvenience more than anything.
I rang their customer services and they agreed that I am entitled to a refund, as I would like to now book alternative flights.
They have claimed though that as it stands, they can not pay out the refund to me as they have been instructed by their management. Therefore, I have had to hold on to the flights until I am sure I can have my money back.
Is this legal of them to do this? Are they allowed to hold on to my money?

Any feedback would be appreciated! Thanks

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