I was maybe a bit too hopeful about Thomas Cook’s refinancing in October.
I assumed the refinancing would buy time to get all in order and try and rebuild shareholder value. The news from Tuesday is devastating and will have utterly destroyed what little was left of City confidence.
What was once a binary bet for shareholders – no money or a massive profit if the company’s restructuring worked – is now a one way bet. The share price is now telling you it’s game over for the shares and that the bond holders will grab control.
These banks and bond investors will have been especially spooked by the ever so slightly irresponsible media coverage ( is your holiday safe was the not so subliminal message). They’ll want to avoid a massive run – which is the one positive aspect of this fiasco.
Their bonds and loans only have value if Thomas Cook is a proper business so they need to move fast to take control of the business via a massive share issue that will swamp existing investors.
That’s good news for the trade as Thomas Cook is still clearly a viable business – it simply has too much debt to service (a familiar story for any Greek or Italian readers).
At the end of the process Thomas Cook may re-emerge even slimmer and meaner which could be bad news ultimately for Tui (which will benefit short term).
Bottom line – the banks need to move fast before consumers run for the doors. Tuesday was a very sad day for the industry.
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