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Press reports are stating the RCF (Revolver Credit Facility) traded at 59. (FT reported). This is a bank selling out, potentially with inside information, selling at 41 point discount. Last March (2018) only 50m of the RCF was drawn. so given so little of it drawn, (assuming the same as last year) then the banks have paid someone else 41points to take the liability on.
It must be heavily drawn to trade at that level and the banks are scared. (It also might indicate that the RCF and the bonds are pari-passu (rank equal with each other under any liquidation terms).
No way to dress this up - if the trade is true - it is negative.
My theory is:
Fosun are not privy to information at the board level. They want to protect their shareholding position aka Ashley in Debenhams but if the Company is going to fail, it didn't help Ashley or shareholders.
The Company has put the deadline out on sale of Thomas Cook as potential suitors have balked at showing their bids. There is no incentive to put out a bid as of yet and although many potential suitors are mentioned must are savy enough to wait it out. Better to have a motivated seller than show now.
I don't see anything in the press to indicate to me the underlying tour operator is performing. All the speculation is we are seeing more customers moving away from the TCG and the basic tour operators in general. If this is the case, then potential buyers of the airline will sit and wait.
I expect poor numbers for H1 (to end of March) are more importantly poor levels of forward bookings which will impact their cash balances.
I do think the airline business has value, but all of the main European operators have found it difficult this year so far and unless their expectations improve can only see them buying TCG airlines as a consolidation play (which will lead to no hurry in buying it).
Best of luck to those buying in now. I am short the bonds, no position in the equity.
Not sure we can blame shorters for the collapse in Debenhams or FlyBe or other companies that go bust. Companies go bust because of various reasons, either changes in fashion consumer taste, bad management decisions or costs etc not meeting the price customers wish to pay.
I think it is lazy excuses to blame shorters for Companies failures.
The alternative is why should a Company take deposits from customers if they might not be able to trade that long? (Debenhams and House of Fraser both did via customers gift cards and suppliers via stock.
TCG didn't issue a statement - it is a Reuters with sources......
I want to know what the offer is for - Condor, All of the Airline business or all of the Group.
I expect there will be no announcement of sale until the Q2 numbers on the 16th May.
Not if they are sharing any material information. That is insider trading.
Can I offer a different view. It is indeed a positive, but not a slam dunk. They have spend an additional £4m on additional shares.
But it also tells us they are not in talks with management as this would be insider trading. So the recent rumours from SKY about them in talks with management, contemplating a take over are false.
So positive that they are buying, But are not in talks with management.
Never stated the share is Junk, if it is me you are directing the question to. The bonds are rated sub investment grade and colloquially this is known as junk bonds.
Why do you oppose someone posting factual information on this forum. I would appreciate if on other shares that I own people posted critical views - it is these views that gives different perspectives and allows for more critical thinking.
"Hence bonds were quoted at 40p on the pound."
Quote from your post - perhaps a misunderstanding in phrases, but to me, as someone who used to work in the bond market, this means they trade at 40% of face value.
That is why I posted the current trading levels, as I see them, and their respective yields at those prices.
But we can all make mistakes and you have been big enough to put hand up. So don't need me to say anything more.
On Thomas Cook, my fear is really the working capital movement. The movement in their trade payables and their deposits received and how this impacts their overall liquidity. They (and all travel companies) pick September as year end because it flatters their cash balances - i.e. received payment from their customers for their holidays or near term holidays, but haven't paid their partners (hotels etc not owned). Hence their debt ballooned as of December year end.
Will be interesting to get a debt figure from them on Monday, or as I expect (I don't expect them to say much at the General Meeting), mid May.
Harrycash,
I'm negative on the structure but where is your source for the bonds in the 40's?? I don't think they have ever traded that low.
Thomas Cook has two bonds, 2022 maturity with a 6.25% coupon trading low 70's - Yield 18%
second bond, 2023 maturity with lower coupon, 3 7/8 trading low 60's, Yield c. 18%.
It has been rated junk as you call it for a long time. They were issued as sub investment grade bonds - no issue with that and not surprising given their volatility in Working Capital.
But the banks and the providers of liquidity will be looking at the rating agencies for guidance. Moody analysts have worked on the situation and have on reflection felt the situation has got worse since they rated it previously.
I would expect no major update at the General Meeting - except for a brief update on trading. This General meeting is required because they have been in breach of their own articles of association and have exceeded their own borrowing limits. Hopefully it is only a technical waiver but I strongly doubt there will be any update on the sales process.
Sorry can't post it all - main point is the liquidity squeeze.
London, 26 April 2019 -- Moody's Investors Service ("Moody's") has today downgraded the corporate family rating (CFR) of the British tourism group Thomas Cook Group plc (Thomas Cook) to B3 from B2 and its probability of default rating (PDR) to B3-PD from B2-PD.
Moody's has also downgraded to B3 from B2 the rating on Thomas Cook's EUR 750 million senior unsecured notes due 2022 and downgraded to B3 from B2 its EUR 400 million senior unsecured notes due 2023 issued under Thomas Cook Finance 2 plc. The ratings are placed under review for further downgrade. The outlook on both entities has changed to rating under review from negative. "Today's rating action reflects our concerns over the company's ability to recover its credit metrics after the sharp deterioration in fiscal year
2018 due to the ongoing challenging market environment. We expect further negative free cash flow generation this year to pressure already
weakened liquidity. A sale of the Airline business has the potential to improve the group's liquidity, however the execution risks for the sale
are high and valuation and the timing are uncertain," says Martin Hallmark, a Moody's Senior Vice President and lead analyst for Thomas
Cook.
RATINGS RATIONALE
The rating action reflects the company's weakened liquidity profile, as well as a challenging market environment in the tour operator
business.
Given the high business seasonality, access to the company's GBP 875 million revolving credit facility is of vital importance for Thomas
Cook in order to overcome seasonal lows in the fiscal first and second quarters. As the result of weaker earnings in 2018, Thomas Cook's
cash of GBP 1 billion at 30 September 2018 was not enough to cover the negative free cash flow generation of the first quarter of fiscal
2019, which was about GBP 1.2 billion. Thomas Cook has operated with sufficient liquidity in the current fiscal year, however Moody's
considers that potential for further cash outflow in fiscal 2019 and reductions in the availability of short term financing could put pressure on
liquidity in fiscal 2020. Thomas Cook has no bonds maturing until 2022, but as of the end of March 2019 it had around GBP 100 million of
outstanding commercial paper: if this cannot be rolled over, it could further erode liquidity headroom.
After the weak first quarter of fiscal 2019 reported by Thomas Cook as well as further evidence of a challenging market environment in the
tour operator business, Moody's has revised down its base case expectations. Moody's anticipates only a minor margin improvement in the
coming 12-18 months and negative free cash flow generation in fiscal 2019, before the company can potentially reach cash break-even in
2020. Furthermore, Moody's expects the EBITA / interest expense coverage ratio to remain below 1.25x in the next 12-18 months and the
group's liquidity to deteriorate with very limited covenant headroom.
On 7 February 2019, Thomas Cook announced a strategic revie
not an alias, just first time poster. Am negative on the name, for full disclosure.
Not sure I expect Fosun to make any announcement re: share purchases.
If they are in talks with management re: potential take over as rumoured by SKY, then they are likely to be restricted (in receipt of confidential information). They might start purchasing after the H1 numbers released mid May but unlikely before then, IMHO.