Thomas Cook shares plummet as firm seeks more aid from lenders
Published 23/11/2011 | 05:00
Thomas Cook asked lenders to come to its rescue for the second time in five weeks yesterday, sending shares in one of the world's oldest travel operators into freefall as it warned of a possible default.
Analysts said the move threw into question the future of the 170-year-old firm, which provides holidays for 19 million customers each year and employs 30,000 staff.
The company has been hit hard by tough trading conditions, especially in Britain, where its core customer base of families with young children has been particularly affected by tough economic conditions.
It was also hit by unrest in popular destinations such as Egypt, Tunisia and Morocco.
Evolution's James Hollins said it was shocking that Thomas Cook needed to renegotiate its financing just 32 days after a previous deal with its lending banks.
"Legitimate questions will be asked as to whether Thomas Cook can survive long term and whether there is any value left in its equity," Mr Hollins said.
Shares in Europe's second-biggest travel firm by holidays sold were down 75pc at 10.4p, taking total losses since the start of the year to 95pc and leaving the group worth around £100m (€116m).
In debt markets, Thomas Cook's £300m and £400m euro bonds were trading at less than half of face value, while its £150m and £850m credit facilities were being quoted at 60-65pc of face value and looked set to drop further.
Espirito Santo Investment Bank advised against holding Thomas Cook equity at any price.
"While the banks may yet again allow the group flexibility, realistically, we would expect Thomas Cook will be completely straight-jacketed by the banks," said Espirito Santo analyst Geetanjani Sharma.
Ms Sharma also said Thomas Cook's suppliers and Britain's Civil Aviation Authority could take a closer look at the viability of allowing bookings from Thomas Cook, which had issued a string of profit warnings this year.
"With more questions than answers on the operational viability of Thomas Cook over the coming months when there are few indications of any improvement in the macro condition, we consider this stock inappropriate for equity holders."
Numis's Wyn Ellis said the warning sent out a "terrible message" to customers who would likely be put off booking with the company.
"Competitors are likely to take advantage of the opportunity to grab market share, leading to a potentially dangerous further downward trend in bookings," he said.
Thomas Cook, whose chief executive quit in August, said trading had continued to decline in recent weeks, with the crisis in the eurozone exacerbating an already-weak holiday market.
"That deterioration relates mainly to the worsening economic situation in Europe, the eurozone problems and a slower recovery in our MENA (Middle East and North Africa) destinations than we had expected," acting chief executive Sam Weihagen said.
Mr Weihagen added he did not believe the company's future was under threat.
"Thomas Cook is a very strong business and we have excellent business segments outside the UK like in Scandinavia and in Germany. I think it's a robust business that has a great future," he said.
Thomas Cook also delayed the publication of its final results, due tomorrow, until discussions with its banks have been concluded.