The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
He's right on that point Paul.
Paul,
They don't own 250 hotels. This has been discussed several times on this chat and I've displayed the information from the annual report.
Please stop pushing inaccurate information
Paul, I am not a shorter. On the contrary I lost quite a bit of money here. Though I immediately sold on that Friday morning cause at such a point in time it is 100% guaranteed to drop. Even if you think it can be saved there's really 0 reason not to sell on such an announcement. Anyone who sold immediately could use the exact same money now to get a lot more shares if they considered the dust has settled and there was a reason to think it is at a price equivalent to what the diluted share value will be. Personally I think it isn't there yet and needs to be lower still before a buy in is an interesting gamble.
But all the ideas around court cases, fraud ... are just insane. It isn't supported by facts and we all knew all along it was a gamble given the debt pile. I initially thought they would manage to sell the airline but with that option gone there's really nothing left to do except for that D4E.
Paul
“But D/E is not the solution...”
I accept that you don’t think D4E is the solution and why. The problem is you’re not in the driving seat. If it gets approved, it is the solution.
Paul,
What are the legal implications of a large debt for equity swap. The company is likely insolvent so needs to remove debt. As debt ranks higher than equity they should get 100% of the equity.
You imply a lot of improper acts but I have repeatedly asked what would you do if a) the bids were too low.
So imagine the bid was £700m for the airline. Sell the airline, get 700m of cash. Pay back the finance leases and other aircraft related borrowings. You have £450m left.
Now you have an RCF of £650 and £1bn of bonds outstanding with cash balance of £450m
What you do next? At this stage the terms of the debt require you after selling a major asset of repaying debt.
So you have a £200m revolver and a £1bn of debt with only a tour operator (to) to service the debt? TO makes £161m EBIT last year and this year is going to be worse. But using last year figures at £161m it can't service £1.2bn of debt. What do you think a business that makes 160m is worth?
Good luck with your court cases, I don't believe they will succeed.
I think shareholders should sell and wait for further announcement from company on progress of a plan.
Good luck all.
Struggling holiday company Thomas Cook (TCG) is in advanced discussions with its largest shareholder, China-based Fosun Tourism Group, to secure a £750m capital injection that would allow it to continue to operate over the winter 2019-20 season and to invest in the future of the business, but would likely wipe out existing investors almost entirely.
TCG:LSE
Thomas Cook Group plc
1mth
Today change
-7.02% Price (GBP)
4.71
Under the proposed deal, the tour operator and airline businesses would be reorganised so that Fosun would own a “significant controlling stake” in the tour operations and a “significant minority interest” in the group's airline. A “significant amount” of the group’s external bank and bond debt, with total borrowings of around £1.7bn, will be converted into equity. Thomas Cook said that its core lenders are supportive of the proposed recapitalisation and are engaged in “constructive discussions” to agree on terms.
However, a debt-for-equity swap would be significantly dilutive to existing shareholders, as the company’s earnings would have to be shared by a greater number of investors. But this is the best option available to the struggling company, according to Numis analyst Kathryn Leonard, as it leaves existing shareholders with something, albeit diluted, rather than nothing if the company does not have sufficient liquidity to continue to operate. Other options, like a rights issue, would not have been able to provide enough financial headroom for a £200m market capitalisation company to meet its £1.7bn of borrowings, she said.
The refinancing is the result of a strategic review of the airline business announced in February, which was followed by several takeover approaches for parts of the group. Management said that the European travel market has become “progressively more challenging” since that time, which has hurt Thomas Cook’s underlying financial position and impacted its ability to sell the airline or the tour operator business for satisfactory value. The strategic review of the airline business has been paused until the outcome of the recapitalisation is known. If approved, the refinancing would replace the £300m facility that was agreed in May.
Such drastic refinancing measures should not come as a surprise to existing Thomas Cook investors, said Graham Spooner, investment research analyst at The Share Centre, as it has been well-known for a while that the company is struggling. "The modern world has caught up with this company and it didn’t adapt fast enough,” said Mr Spooner of the company’s large retail estate.
IC View
If this refinancing goes through - the exact terms of which are yet to be announced - serious changes to the business model will be needed for Thomas Cook to stand a chance of competing with online operators. The shares have lost more than 90 per cent of their value over the past 12 months to trade at 6p. Sell.
Last IC view: Sell, 19p, 16 May 2019