The announcement of a new £1.4 billion deal with the banks is a “game-changer” for Thomas Cook, according to Travel Weekly City Insider columnist David Stevenson.
Writing for Travel Weekly today the author of the Financial Times’ Adventurous Investor column, said there had been worrying rumours about Cook in the City.
However, Saturday’s announcement that the travel giant had secured a new loan deal extending to 2015 was likely to see its share price rebound as confidence returned.
“The bears have it that Thomas Cook would have faced a major challenge in the autumn as the next stage of the cashflow cycle kicks in and those debts start to bound upwards again. Not anymore – this Saturday’s announcement is a game-changer, albeit an expensive one. Expect a swift rally in the share price of Thomas Cook as the news sinks in over the day.”
Stevenson said the deal underlined that the “banks are in too deep with Cook now and unless the trading situation worsens dramatically they’ll almost certainly try to keep the company intact and publicly listed until at least the end of May 2015.”
However Stevenson said Cook will find itself in a poor negotiating position when it tries to sell assets as pressure mounts on it to dispose of some of its companies.
“Knowing how badly it needs the money, if I were on the other end of a sale process I’d be determined to push an incredibly hard deal at the moment,” he said.
Stevenson added that a trading update that accompanied the loan announcement also suggested that everything was going according to plan.
But he concluded: “I’d be slightly more cautious and the cynic in me would be on the lookout for a rapid deterioration in trading in both France and a sudden about turn in sentiment in Northern Europe.”