PPRuNe Forums - Thomas Cook-Beware

PPRuNe Forums (https://www.pprune.org/)

- Terms and Endearment (https://www.pprune.org/terms-endearment-38/)

- - Thomas Cook-Beware (https://www.pprune.org/terms-endearment/596821-thomas-cook-beware.html)

When I worked for My Travel they said the Tour Operator made the money, the Airline was the cash cow.
I got a feeling it's all smoke n mirrors!

Most of the 1.5b debt is a write down of the MT business from years ago. It does not, I repeat, does not mean that TCG has a tangible black hole in its balance sheet. I's an accountants way of making a balance sheet impairment based on previous years write downs.

Trouble is it's people on this forum and elsewhere, harbingers of doom and gloom, that spread and foment dissent. Your philosophy is ; it is not enough that I should succeed, everyone else must fail

PA , you have mixed up the loss for the year with the debt. The half-year loss was indeed around £1.5 bn because of the write-down, one could be kind and say most of the loss was not ‘real money’. Unfortunately, the actual debt stands close to £1.5 bn because the present management have once again let it run away after Harriet Green reduced it in the previous crisis to about £400m. Its the third time in my years at TCX/MYT/Airtours that the debt has spiralled out of control to about this level and the banks have said no more. The PLC is on life support and there is talk of a £750m cash injection to shore it up. How that amount of cash can be found to support a company which in the view of some analysts is worth zero, I do not know. As we all know the airline is healthy, but I can see that the tour operator and airline will be radically different in2020.

From what I can see Thomas cooks net debts and net assets are about the same, so there’s no equity in the company.
But if they swap £1.5bn of debts into ownership of the company then the company’s net assents will out weigh net debts by £1.5bn, so there’s value. To do this ownership has to be handed over to the debt holders, and shareholders are wiped out. As has happened.

So now with no debt, Thomas cook will benefit from a £450m investment from Fosun, and a £300m revolving credit facility. The credit facility will help TCG smooth out seasonal cash flow. And the £450m will be to invest in the business and turn it around.

Historically TCG has made decent operating profits. You have to if your going to pay the interest payment on £1.5bn of debt. This amounts to £1.2bn over the last 8 years. But the last 2 years have been difficult and has bought the situation to a head.

At at the end of this TCG “should” be virtually debt free, streamlined and agile. Able to invest in its business and have turned its self around.

And the price for all this? The shareholders.