Thomas Cook faced a fresh financial blow today as its credit rating was downgraded following the group’s latest profit warning.
Meanwhile, Triton, one of Europe’s largest buyout firms, is understood to have approached Thomas Cook about a takeover of its Nordic airline and tour operator.
The group’s Nordic operations trade under the brands Ving, Tjareborg and Spies, and employ around 20% of Thomas Cook’s 21,000-strong workforce.
Update: Thomas Cook confirms bid for northern Europe arm
Earlier today, credit rating agencies Fitch and S&P Global Ratings both cut Thomas Cook’s rating to CCC+, meaning they doubt the group’s ability to pay its debt if the sale of its airline does not go ahead.
The reduction from B and B minus respectively brings the rating deeper into the speculative-grade classification that denotes a greater risk of default than issuers that hold investment grade ratings.
Thomas Cook had been rated in the single-B range by both credit rating groups since 2012.
Fitch also placed Thomas Cook on “rating watch negative”, meaning that it sees a “heightened probability” of a further reduction.S&P said its outlook on the issuer’s rating was “negative”.
The downgrade comes a week after Thomas Cook revealed a £1.45 billion pre-tax loss in its winter half-year results to the end of March.
The group’s share price was down more than 8% this morning to below 12p.
Standard & Poor’s reportedly said that “in light of weak trading, material cash outflows, and high leverage, we believe the group’s ability to keep meeting its financial commitments in the medium term will be challenged and depend on favourable business, financial, and economic conditions outside of its control”.
Fitch said that, although Thomas Cook owned attractive slots at airports, uncertainty remained as to whether it could conclude a viable sale of the airline by the end of September — the point at which the travel company will need to shore up its liquidity unless it can find other sources of funding.
Both Fitch and Standard & Poor’s said that Thomas Cook was also being challenged by industry-wide problems such as Brexit suppressing bookings, overcapacity and heightened competition from online rivals and low-cost airlines.
Thomas Cook said it had received multiple “credible bids” for its airline but no further details have emerged.
Following news of the credit rating downgrade, Travel Counsellors founder David Speakman recommended customer not book with Thomas Cook.
In a tweet, he wrote: “I fear for Cooks staff but my loyalty has to be with customers. My advice would be not to book.”
Update: Thomas Cook confirms bid for northern Europe arm
More: Comment: Can Thomas Cook survive?
This morning agencies downgraded credit rating of Thomas Cook. I fear for Cooks staff but my loyalty has to be with customers. My advice would be not to book.
Thomas Cook (TCG) share price drops after Fitch and S&P cut credit rating | City A.M. https://t.co/VF9jRw4m6X
— David Speakman (@DavidSpeakman1) May 23, 2019