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@Quirsty..So a good reason to acquire a big player like TCG quicker and cheaper than starting from scratch..As fir Chinese authorities they are more interest in capital outflows not borrowings si bringing a big player TCG into China would alleviate their concerns..or maybe just be a premium supplier to the web based local market leaders.
Well Dan, how much can you afford to pay? Good lawyers ain't cheap. In fact even bad lawyers ain't cheap, good ones are expensive.
It seems we agree that Brexit and the resulting effect on GBP will put further pressure on UK travel industry cost base
Quirsty, I think we have to agree to disagree as this could go on for a long time and is not really relevant to the discussion on the TCG sale because that is what it is..Suffice to say TCG does generate euro revenues, it does own a lot of hotels and is exiting the hotel franchising in favour if more upmarket owned resorts and like any coy can hedge FX risk..actually oil price despite middle east flare up still relatively low.
To late for honest answers we been mislead and need take it further any one no how to take it further
Fosun have been investigated by the Chinese authorities for borrowing excessively to acquire businesses , sound familiar?
They are also minnows in the travel industry dwarfed by the major players in China itself and the hook up with TC has had little impact
Thomas Cook is not recognised in China particularly
@Quirsty..are you referring to TCG who created a financial mess or the opportunists Fosun with deep pockets who see the potential of a turn around opportunity in private hands?
You really need to do some research on Fosun and global travel trends without which relying on media hype.. remember bad news sells more than good news, always had done..
It sound like the CFO just gave an honest answer. He was certainly correct about where the share price would go.
What about the fact that TC has to pay for hotels and all the rest in EUR and USD making its cost base much more expensive
Also airline fuel in USD i think?
@soutar..good points again.
Debt at 40p..means bond holders eager to get out..trick.. Fosun obliges them..1b of debt gone.
TCG messes up airline sale not surprised obvious to any buyer it was a 'fire sale' so bids were well below the market valuation of 800m to 1.2b.
But does not mean to say you cant sell it later when the business is back on a sound financial footing and with a big backer Fosun behind it.
Soutar..that's a very good point as regards Brexit
However if you are playing for the long term and paying for something in USD's would a weakening GBP FX rate do wonders to your cost base.
In 2016, following the referendum vote, Sterling fell to 1.16, its currently 1.24, so a 10% hit could be feasible.
Now let's say you need 1.6b for TCG your net USD cost now falls by 10%, that's a nice 150m+ dollars for doing nothing..So in dollar terms your true cost has reduced and you still have an asset, the airline worth 1b to offset your cost..
So Fosun are actually buying TCG for probably net 500 to 600m a bargain price..and without a bidding war and most of the debt gone as the inevitable restructuring frees up cash to pay down any existing debt owed and funds future growth under the new strategy.
From the sky news rosy article. They touched on some positives but there is a lot of negatives.
Ps, I've been basically wiped out 10's of k's, upsetting but life will go on, just massively poorer.
"Unfortunately, the financial stress under which Thomas Cook was operating was well-known, which meant that the company did not receive offers for all or part of its airline business that genuinely reflected its value. Opportunistic buyers scented a distressed seller and pitched their offers accordingly.
That obliged the company to go back to its creditors and invite them to exchange some of their debt for new shares in the business.
And Mr Fankhauser did have some cards to play. Thomas Cook's bonds have recently been changing hands at 40p in the pound - pointing to scepticism among creditors that they would ever get all their money back if the company was overwhelmed by its debt.
Persuading bondholders to convert some of that debt into equity therefore made sense."
Paul - you show your naivety with business again
These business types are not rational they are ambitious risk takers, they see the positives, prospects for growth and ignore the amount of money needed to get there , its a gamble
Sky News did use the word 'rosy' Calder in the Indy, both will be proven wrong IMO
The FT is more spot on
'not a sure fire success'
God I hate spell check I check, recheck and post and yet I get spelling errors, sometimes quit funny ones!
@Flint..agree..and add to that the acquisition by TCG of over 1,000 shops just as most customers were moving online when shopping for holidays was a complete disaster.. But sometimes you get dummies as CEO, arrogant little empire builders, trying big up themselves at the expense of the boyband take risks even obviously really stupid ones at the time
Hereshopin...forget entity value for sec..let's just park that because on principle you would not buy this coy...correct?...let's say you don't think that way, you can see value, you can see where and how to cut costs..you see a business with revenues 9b and assets in the airline worth circa 1b which you could dispose of at leisure at a better price a few years later.
You don't see 1.6b of debt because you have a 1b asset you can use and besides lenders want out, too much risk for them.
Let's say you run a business generating over $85b per year with cash rich insurance arms so you have cash to play with and financial services that can restructure and negotiate debt downwards based also on a really good credit rating and you want to expand globally.
Let's say your an experienced player..you bought a smaller travel operator, a few years back, a tiny compared to TCG business, you got caught out in a very expensive bidding war with a pe fund before you wrestled control.
Now you can see the bigger picture...let me put it this way...if you thought this coy was a complete basket case after putting 200m on the table a few years ago, would you now stump up a further 750m, of course any normal rational person would run for the hills!
So it's not a rescue deal it's a take over deal in disguise!
D/E is passed to Fosun giving them the opportunity to kill two birds with one stone..get ruddy of most of the debt and acquire TCG with no bidding war at a bargain basement price..
Did not Sky News highlight the rise future for TCG once all the debt had gone...hint..
Water under the bridge but go back to the ill-conceived merger with My Travel in 2007 and ask whether sufficient due diligence was performed - the merger with First Choice at the time would have been a better option leaving TUI/Thomson needing to merge with My Travel.
Paul - If I was a shorter I wouldn't be upset would I?
Quirsty, you seem upset, maybe you are a shorter.
New step TCG gets delisted, D4E goes ahead, Fosun increases 'rescue' deal to £1b so effectively takes equity off bond holders who exit..Now the dilemma of how to handle the institutional investors and the risk and associated legal costs if a challenge..Fosun now makes a deal with them which incidentally has to be offered to all other investors who accept...TCG goes into private hands...The End!
Paul - how are you only now finding out the £1.1billion write down?
you claim Citi analysts were responsible for share price dip in May, do you not think the £1.4billion unprecedented HY Loss was a factor?
The FT called it back then also
Also why would the USA be interested and don't you think the Chinese authorities might be bothered?
Have you read the latest article in the FT regarding how they are viewed in China and their position in the travel market?
Instead of spreading your fantasy financials on here do some bloody research!
Paul-Planet Earth, I am not sure whether in your posts you are being deliberately disingenuous or whether you just don't understand. You talk of the shares being valued by Fosun or £750m, or £1b including their original stake. There has never in my mind been any question that the company had a value, and Citi didn't question that either. Citi said the equity (rather than the company) was potentially worth zero when you take everything else into account including the debt. The Enterprise value of the company when you exclude debt is clearly there but the value of the sp is based on the equity, and this is what is on the floor. To suggest Fosun value the equity at 1b would be to also take into account there being some less debt in that scenario (although probably not as big a reduction as you think as much is for working capital I believe) and also many, many billions of extra shares in issue following a D4E so it can't be easily compared to the situation without that. It is quite possible that money will be made at this point but I can't see this sort of deal ultimately being stopped as Fosun could probably block alternatives based on their holding - just like MA did with DEBS, even though it cost him in the end.
I think much of the destruction started when the last finance chief quickly left the building last summer...
The heatwave, the world cup, etc was used as an excuse for lower bookings last year, albeit that has some truth as TUI were also hit. Brexit woes don't help.
There has been lots of negative news leaked to the media, I'm sure UBS kicked it off last September, but the real knife wounds were from Citi, surprise surprise
@Soutar..it would not surprise me if a former director of Citi now employed by Fosuns gave this advice on how to structure the flow of cash with two core objectives.
1) Remove most of the bond holders debt.
2) Gain majority ownership of TCG through a D4E swap.
So we have TCG board giving false RNS announcements on the numerous bids they received for the airline with no mention that the initial bids were well below expectations..We also have PF flying to China for alledged rescue talks with Fosun without majority shareholders being aware. Or maybe PF also was simply being brought along unknowingly of the true Fofun objective of the alleged rescue package.
The sp crashes on the back of Citi analysts n a matter of weeks on claims the shares are worth zero pence. Yet through the rescue deal they are now worth 750m hardly zero!
So what next how are Fosun going to handle this risk of reputational damage if they are going to wipe out all those high profile institutional investors..Will they do a deal with them and as a consequence have to do a similar deal with all other investors on similar favourable terms.
Maybe Fosun don't want a two year battle as they encountered with the takeover of Club Med in 2014 which cost them 800m for a loss making much smaller than TCG travel operator with a turnover of just euro 1b and this is what they are up to.
If Citi and Fosun are colluding, the damage they have done with media assistance could be underestimated? Saying that, many thought RBS, Lloyds, etc were damaged by more by negative media.
This whole TC sp collapse stinks, i also think it's a long planned takeover under the guise rescue deal. Remember, telegraph reported saying talks have been ongoing for months!!
Bigwigs...I'm not entirely sure if Fosun can or even would want to get away with a 'back door' take over disguised as a 'rescue deal'.
The mechanics of the D4E would be this, most of the 1.6b debt converted to equity.
Fosun's fake rescue deal cash arrives and is treated as a loan in TCG's books and the cash paid to former lenders buying most of their equity.
Fosun loan would then be converted to equity given them majority ownership.
Hence Fosun would now own 75% of equity and bond holders 25% if the remaining 600m short term facility is not included in the D4E swap.
The issue here for Fosun is how to avoid the business reputational damage of wiping out the institutional investors and the employee share scheme assuming that they don't care so much about private investors.
Equally has the Board breached its fiduciary duties by working with a minority shareholder assisting them gain control over the wishes of the majority of shareholders?
I believe they have and can be sued!
Fosun would need to tread very carefully being a 85 billion business if it does not want alot of hacked off institutional investors after blood and their two pounds of flesh lining up to make Fosuns future growth difficult..No bank and no financial services coy would touch them with a barge pole and the reputational damage would be simply enormous!
This is before we even encounter the numerous complex and time consuming legal challenges in UK, USA and EU
law courts assuming no shareholder vote is granted and if TCG does the D4E swap on bond holders first ceeding control to them. With former bond now equity holders keen to get their hands on Fosuns cash!
This is certainly no Carillion, Debenhams, Flybe or Monarch resemblance here..Fosun values TCG at a minimum of 750m or close to a 1b if you include their 200m already invested