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Actually you can close the shops and renovate leases plenty of retailers do this and the media are already highlighting that once the debt is restructured and cleared the future looks rosy.. The actual loss was £400m half of which is interest on debt, mainly euros charging 10%, when rates are negative in the Eurozone..A £750m cash injection could reduce this and in turn TCG gives Fosun a convertible bond at close to zero interest rate..Fixed costs can be cut I really dont get it when posters say you cany cut costs and operating leases prevent this..Nonsense you can cut staff headcount and renegotiate leases that's exactly what major high street players have done. TCG needs to focus on its strategy upmarket owned hotels sold through web sales and on the meantime slash and burn fixed costs and overheads. You say revenues are down but they were up 2018 versus 2017 by 5% with 11m customers which means there is a large market to sell other products to..TCG is not dead far from it..
What difference does it make what Fosun or the bondholders want? The situation drives the decision not some decree by a greater power "because we are Fosun we shall not let this occur".
TC have been borrowing more and more money to make a loss in the past couple of years and with difficult trading they will be accelerating that borrowing, this is why they are moving towards administration. Simply put, they are still spending more than they are making (by a long way). If you look at the financial statements for Q2 you can see a big increase in borrowing year on year, then factor in fewer sales (including the recent debacle's impact on trading) but same cost base and the cash position could be almost at the point of no return. The going concern note from the auditors is basically coming true.
Fosun's £250m is irrelevant, they have lost that, they know it. I would estimate that you are looking at a debt position of £1.2bn+ so £750m doesnt wipe that and the question of how much it actually reprives against a poor trading situation is the biggest one. There has been a lot of press questioning of why Fosun are bothering. It's a £750m purchase of more debt than that in the hope that they can restructure and trade out of it and somehow get that £250m back. It's a pretty confusing deal to me, are they buying part of the business or all of it? I don't see how they can cherry-pick.
To keep saying "just close 200 shops and make people redundant that'll fix it" is also wholly inaccurate. All shops have leases, you close them but you have to pay rent/rates until the lease ends. So you are making a bigger profit/cash problem in doing that since you reduce the revenue you drive but still have the cost/cash to pay. You also have to pay the cost of redundancy so you get even more of a cash problem. And you are also shutting down 10-20% of your turnover source.
You are right in saying it needs scaling down but you have to do the lot - smaller airline, tour operator, back office etc etc. Easiest way to do it is administration so you can avoid paying up the cost of doing it and get the benefits. this is the best hope for now - i struggle to see how Fosun will make the numbers stack. Either way the share valuation is reflective of the situation.
They are weeks away from bankruptcy, PF said so, he needs cash to see it through the winter otherwise game over.
Did you watch the video Paul?
Disagree. It really is very similar to Debenhams. Not only the BoD's comments and how the story has unravelled, but also, I think unintentionally, the form of your comments summarising the business and the situation. I think they are way closer to admin than you realise.
I've read some of the transcript from the earnings call at the end of June and all the red flags were there. That's notable given that these things are more often conveyed by tone and meta-language.
True to a point but the business is far from admin..Bond holders dont want it and Fosun who have invested £250m and a further £750m on the table dont want it eithe..you see this is not Debenhams, Flybe, or whatever it's a £9 billion turnover business with 11m customers and Fosun have a lot to lose..The simple solution a £750m convertible bond in exchange for that cash and use the cash to retire much more expensive debt..Restructure slash head count and close 200+ stores
Does anyone know the rules ?
Kind of gave up commenting a couple of months ago, too many people not listening to common sense or wanting to hear it. Got silly in the end, people need to grow up.
Sad about what has happened and certainly not gloating, it's been on the cards a long time thought. I hope for administration now, just because it'll help people keep their jobs if they can completely restructure. I'm afraid the shareholders have been looking down the barrel for a long time but seemingly a lot on here lack basic knowledge of even how company rules work hoping for what i saw as a miracle.
Ultimately it's all about cash. You can come up with all the conspiracy theories you like on Citi but the company put itself in this position through clueless management and strategies, particularly over the last few years. Once you borrow more than you make you are a long way from home...
Mr Magoo I wonder where you were. Bang on the money again
PF and BOD in panic now, it could go under sooner than everyone thinks
They were throwing in their own money 6 months ago and have lost a LOT, Clueless management
Being realistic, trading is most likely worsening (not helped by recent bad publicity), no progress on airline sale /tour operator sale. Probably another going concern flag from auditors - it was already stated that if they didnt sell the airline they would cease to trade. They clearly haven't sold it. That caused them to have to listen to a bad deal from Fosun/Creditors and effectively suspend reporting so that they can use this negotiation in their financial reporting - ie "we have this deal which means we will be able to continue to trade". Without that it would be the disaster of publicising imminent administration forced by the audit report.
Ultimately they are on the precipice. I would suggest that administration would be the best thing all round as it would allow restructuring (ie closing hundreds of stores) without having to be liable for leases. The only reason Fosun are trying to save it is that they are not at the front of the queue under administration so they will have blown their entire investment. I would argue that they have already done that and they are no better off than the rest of the shareholders who hoped for more.
If this deal doesnt go through they will most likely be running out of cash mid-Sep like XL Holidays did and that is what the auditors will want to have certainty on to report. BOD will have to step in before that as there will be a stampede of cancellations if that news gets out.
The reason it’s been done is to generate a panic to reduce the share price so they can dilute the share more. That’s just a guess.
Fosun might even be hedging and buying the stock now as we speak. Something smells.
Yes there must be a good reason for this, but surely at this late stage the qtr 3 info was already known printed ready for release as they were already a few weeks old.
So just because the bod's didn't want to up-set the apple cart even more they should still be released, or are they better than the company are making out and it would impact on the Fosun deal. who knows.
As PF clearly stated - Q3 results will not be published on the apponted date - Thursday.
What are the listing rules for this - no accounts will result in suspended trading - but how long a delay is allowed?
Also - why are they not publishing this critical info that will show performance for the summer / winter bookings and may also show the investments and returns for the new (12 hotels?) in the process of opening.