U.K. Government Suggests Thomas Cook Won't Be Rescued

Telegram från Bloomberg / Omni Ekonomi
22 sept. 2019, 15.26

(Bloomberg) -- The U.K. government signaled it won’t bail out Thomas Cook Group Plc as the struggling tour company carried out last-minute talks with creditors to avoid a collapse that risks stranding tens of thousands of travelers across Europe.

“We don’t systematically step in with the taxpayers’ money when businesses are going under unless there is a good strategic national interest for doing so,” Foreign Secretary Dominic Raab said on BBC TV’s “Andrew Marr” Show on Sunday.

Raab made the comments while executives from the company hunkered down with creditors in London, as it tries to forge support for a rescue plan. Its shares tumbled 23% on Friday after the tour operator said it would require 200 million pounds ($250 million) on top of 900 million pounds already agreed in the bailout proposal led by Fosun Tourism Group, its biggest shareholder.

For decades, tour operators such Thomas Cook and Germany’s TUI AG thrived by offering package holidays to sun-starved Europeans. But the rise of discount airlines and online distribution have squeezed profits in an industry that is highly seasonal and prone to shocks from terrorism to political turmoil. As many as 150,000 Britons could be stranded abroad if the company collapses and grounds airlines it owns, the Financial Times reported.

The Travel Updates section of the company’s website is dominated by posts on its financial situation, with Thomas Cook reassuring clients that its flights continue to operate as normal and all bookings are covered by a government-backed travel insurance program.

“We’ve got the contingency planning in place to make sure that in any worst case scenario we can support all of those who might otherwise be stranded,” Raab said.

The rescue plan proposes swapping existing debt into shares, leaving Fosun holding the majority of Thomas Cook’s tour-operating business while creditors would have controlled its airlines. The company had debt of 1.9 billion pounds as of March 31, according to data compiled by Bloomberg. The restructuring proposal is due to be put to a vote on Sept. 27, a crucial step to get the plan approved by a U.K. court.

The rescue efforts faced multiple challenges. A group of hedge funds began to organize to block the plan because it would stop them from cashing in on holdings of credit-default swaps that pay out when a company defaults. Creditors had been seeking to exit loans on concern that Cook’s declining performance would weaken its ability to repay its borrowing and the company filed for Chapter 15 court protection in the U.S. earlier this month.

(Adds background on industry in fourth paragraph, details on debt and plan in 8th-10th paragraphs.)

--With assistance from Richard Weiss and Vivianne Rodrigues.

To contact the reporters on this story: Andrew Davis in Hong Kong at abdavis@bloomberg.net;Alex Morales in Brighton, England at amorales2@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, James Amott

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