Thomas Cook-Beware
As the Company is close to bankrupt, it will be a choice of restructuring or restructuring and the shareholders taking a hit (again). The airline might get off lightly as there will still be all those people needing to be flown on holiday.
Last edited by Capt Scribble; 8th Jul 2019 at 07:39.
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The airlines are wholly owned subsidiaries of Thomas Cook Group PLC. As such, they will all go if the PLC folds. They are assets owned by the PLC and would be used by administrators to pay back creditors.
I don't think that is likely though. Big changes will occur before the winter low season.
I don't think that is likely though. Big changes will occur before the winter low season.
@Raski, The share price would indicate otherwise. You are correct re the airline, I was referring to the PLC which is now at the level of debt that MYT plc and TCX plc restructured on previous occasions. As a share holder and employee, I do have the picture. Unfortunately, the airline is the only asset left to reduce debt and imho will not be an easy thing to sell for its worth. I think the future will be “rice or noodles” rather than “chicken or beef”!
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Possible sale of the tour operator to Chinese is a very good explanation for desire to sell the airline separately as Chinese cannot legally own it (at least not the EU parts of post-Brexit). Same like TNT and Fedex deal years ago.
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From the "Motley Fool" (30th June2019)......
Over the 12 months to 31 March, Thomas Cook paid £122m in interest costs but only generated £30m of cash from operations. The firm’s latest balance sheet shows total liabilities of £6,371m and total assets of just £5,026m. This suggests that the firm may be insolvent. Without a refinancing deal, I don’t see how Thomas Cook can continue trading.
£ at its lowest since 2000, shrinking economy, less disposable income available.
I doubt things will improve when Boris moves into No.10.
Genuine best wishes to all crew.
Over the 12 months to 31 March, Thomas Cook paid £122m in interest costs but only generated £30m of cash from operations. The firm’s latest balance sheet shows total liabilities of £6,371m and total assets of just £5,026m. This suggests that the firm may be insolvent. Without a refinancing deal, I don’t see how Thomas Cook can continue trading.
£ at its lowest since 2000, shrinking economy, less disposable income available.
I doubt things will improve when Boris moves into No.10.
Genuine best wishes to all crew.
As long as the deal goes through the company will be delisted from the stock exchange. The £300m will not be required as Thomas cook will have no debt as such, and will not be required to make interest payments.
It secures the long term future of the business, but shafts the shareholders.
Then I think huge changes are going to be made in the medium term.
I get the feeling that Thomas cook wanted to sell the airlines to Lufthansa, but Lufthansa’s issues of late made that deal very difficult. This deal will leave open the door to Lufthansa to take a majority stake in the airline without having to take ownership in its entirety. But that’s for the 3-5 year future term.
Interesting times ahead.
There will be no rights issue.
It secures the long term future of the business, but shafts the shareholders.
Then I think huge changes are going to be made in the medium term.
I get the feeling that Thomas cook wanted to sell the airlines to Lufthansa, but Lufthansa’s issues of late made that deal very difficult. This deal will leave open the door to Lufthansa to take a majority stake in the airline without having to take ownership in its entirety. But that’s for the 3-5 year future term.
Interesting times ahead.
There will be no rights issue.
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The RNS says that shareholders will be diluted, but they will have an opportunity to participate. Maybe not an RI, but some form of equity or stake on offer, in exchange for cash, and that implies remaining listed. I can't see many takers for that, personally. Being a minority shareholder in these situations is a mugs game - the bond holders and banks call the shots. The cash injection is only at the discussion stage, so the debt holders/banks may well decide they would be throwing good money after bad, and instead just sell off the component parts in a liquidation. A key factor is how much the slots are worth, because after the Monarch(?) precedent, they do not remain assets of the liquidators, so that can incentivise keeping the airline running for long enough to sell them on (although the CAA may be disinclined to allow this)
Last edited by Joe le Taxi; 12th Jul 2019 at 10:14.
It’s Fosun putting in the extra £750m.
The company will remain listed until fosun decide wether they want to take the whole thing private and de-list. St that point there would be some value to the remaining shareholders, but I imagine it would be very small per share as the shareholders will own very little of the company by then.
I think while technically at the discussion stage, as in nothing has been signed, I can’t imagine TC management releasing a statement like that without tacit approval from the banks, bond holders and major shareholders. So I think it’s gone much further than what you and I would call a discussion.
I don’t know what the next few weeks and months hold for Thomas Cook, but I see this announcement as something positive for customers and employees.
The company will remain listed until fosun decide wether they want to take the whole thing private and de-list. St that point there would be some value to the remaining shareholders, but I imagine it would be very small per share as the shareholders will own very little of the company by then.
I think while technically at the discussion stage, as in nothing has been signed, I can’t imagine TC management releasing a statement like that without tacit approval from the banks, bond holders and major shareholders. So I think it’s gone much further than what you and I would call a discussion.
I don’t know what the next few weeks and months hold for Thomas Cook, but I see this announcement as something positive for customers and employees.
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.("Fosun"), and Thomas Cook's core lending banks
Your right about the £750m it’s coming from the banks and Fosun. But it’s not for debt repayment. The debt will be written off by the bond holders and banks taking a large proportion of Thomas Cook Group over. The tour operator will go to Fosun and no longer be listed on the stock exchange. Fosun will own a minority of the ai line with banks and bond holders owning the majority in return for debt.
This deal essentially leaves Thomas cook group debt free, but without its tour operating business and only a minority stake in the airline. But with its other business intact.
That £750m is for investment into the business. To buy more hotels, to replace an ageing 767 fleet, all things like that.
Big changes are coming, that £750m will not last forever, end of next year apparently, but it’s going to help turn Thomas cook around, and the loss making tour operator will be gone anyway.
This deal essentially leaves Thomas cook group debt free, but without its tour operating business and only a minority stake in the airline. But with its other business intact.
That £750m is for investment into the business. To buy more hotels, to replace an ageing 767 fleet, all things like that.
Big changes are coming, that £750m will not last forever, end of next year apparently, but it’s going to help turn Thomas cook around, and the loss making tour operator will be gone anyway.
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. The debt will be written off by the bond holders
Last edited by Joe le Taxi; 12th Jul 2019 at 20:17.
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Ok, full sentence
The point remains, it is not, as jonty claims, a 750m "investment into the business" - predominantly it is just to keep the wheels turning over the winter (and the key word is "flexibility to invest" - which I read to mean, loan covenant headroom is improved, but that it would require more borrowing on top to do anything above just keeping the wolf from the door over the winter) It's the bond holders who account for the vast majority of the debt (about 1bn), so I really can't see why they'd trade it (and their rights to the assets) for some almost worthless equity - but id be happy to be proved wrong (usually am)! https://www.standard.co.uk/business/...box=1562950827
and FT - "Thomas Cook and Fosun will also need to convince the travel group’s bondholders. “The question is what Fosun will offer bondholders and the banks, and then what it will do with the business in future,” said one investor in the group’s bonds. “We also worry about the regulatory view from the three jurisdictions in UK, Germany and the Nordics, given the Chinese buyer,” they added". .https://www.ft.com/content/6f6d37d2-...c-ad1c6ab5efd1
Under the proposal, the Group is targeting an injection of £750 million of new money which would provide sufficient liquidity to trade over the Winter 2019/20 season and the financial flexibility to invest in the business for the future
and FT - "Thomas Cook and Fosun will also need to convince the travel group’s bondholders. “The question is what Fosun will offer bondholders and the banks, and then what it will do with the business in future,” said one investor in the group’s bonds. “We also worry about the regulatory view from the three jurisdictions in UK, Germany and the Nordics, given the Chinese buyer,” they added". .https://www.ft.com/content/6f6d37d2-...c-ad1c6ab5efd1
Last edited by Joe le Taxi; 12th Jul 2019 at 22:21.
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Spent several wonderful years at TCX and constantly thinking about my former colleagues, but it's time to be honest about why it's not a viable choice for buyout. It's not just the current climate which abates other airline interest. It's more fundamental than that.
Being tied to the group to service holiday packages means the airline was never really free to seek out new ideas. Unfortunately, too late for that. Even if the group sells the airline and the airline becomes part of something new. What new thing is the airline ready to try in an already overcrowded market? It's a risky business with Jet2 making inroads on a daily basis.
The idea that the airline will continued to be used by the tour operator is also difficult to swallow. After any split, I can just see TC increasingly buying the vast majority of seats from the bin of the aviation industry (the Eastern European charter airline network) at probably half the cost.
There is nothing that I can see TCX or Condor can do to pivot their business right now.
Being tied to the group to service holiday packages means the airline was never really free to seek out new ideas. Unfortunately, too late for that. Even if the group sells the airline and the airline becomes part of something new. What new thing is the airline ready to try in an already overcrowded market? It's a risky business with Jet2 making inroads on a daily basis.
The idea that the airline will continued to be used by the tour operator is also difficult to swallow. After any split, I can just see TC increasingly buying the vast majority of seats from the bin of the aviation industry (the Eastern European charter airline network) at probably half the cost.
There is nothing that I can see TCX or Condor can do to pivot their business right now.
Last edited by Superpilot; 13th Jul 2019 at 09:16.