The route to a great escape

Alacklustre performance from ryanair is not a great development for thomas cook. the Irish no-frills carrier unveiled its worst figures in four years and warned that overcapacity and fare wars mean profits will take a couple of years to recover.

In spite of the headwinds Michael O’leary’s airline still managed profits of £832m.

With thomas cook shares tumbling a further 12.7pc and trading just above 10p, swiss chief executive Peter Fankhauser is in a race against the clock to sell the group’s airlines so as to shore up finances.

as a highly cyclical enterprise facing troubled market conditions, thomas cook’s gross debt of £1.3bn has made it easy meat for short-sellers.

any hopes that Fankhauser had of a rescue offer from its biggest investor Fosun, the chinese owner of club Med, are hindered by eu rules outlawing overseas ownership of airlines and Beijing’s coolness to frivolous investment.

a signal that debt worries are at the core of the travel firm’s problems is a fall in bond prices by 21pc, with the 2022 issue selling at

just one-third of face value. this in spite of cook’s insistence that the £300m backstop loan, provided by the banks, should see it through any credit crunch.

at this stage of the travel cycle, the cash should be gushing into thomas cook’s coffers as summer travellers pay up. that is why it has sought to reassure the 20m customers who book with thomas cook each year that their vacations are safe.

a potential problem is the disclosure that some of the payments companies, which process credit cards, are hanging on to the cash longer than usual in an effort to minimise risk.

the airline operations, run independently of package holidays, are thought to be in good shape. lufthansa is among the carriers interested in the German arm condor, and Virgin atlantic, which recently rescued Flybe, is interested in the thomas cook uk branded airline. But with airline bosses complaining about overcapacity and most operators aware that the travel firm is a forced seller, hopes originally expressed of picking up £1bn or more look to be retreating fast.

Part of the attraction of the airline to other european carriers is thomas cook’s hidden gems in the shape of landing slots. It controls 400 at Frankfurt, 200 at Gatwick and 350 at Manchester. For european carriers seeking to expand operations, few similar opportunities are likely to crop up.

Provvy hold-up

alMOst a week has passed since John van kuffeler and his Non-standard Finance (NsF) declared the £1.3bn offer for Provident Financial unconditional, having won support of 53.53pc of investors.

sadly for van kuffeler as he makes plans for his enlarged sub-prime empire, uk longfunds are still sitting on their hands. schroders has reiterated its opposition, arguing that it is in the best interests of those Provvy shareholders – who are not also NsF investors – to reject the offer. It explains that by retaining their holding in Provident, their shares should be safeguarded.

It is my understanding that other long investors feel the same way. there were moves by members of the Investment association last week to marshal the votes of up to 25pc of the uncommitted investors to scupper the bid going unconditional. the expedited timetable thwarted the effort, but big name holders have told me that they are not ready to tender their shares. they await approval from the prudential regulators but also fear a ruling from the competition & Markets authority which could be value destructive.

Van kuffeler’s strategy is also questioned. Plans to sell the car finance enterprise Moneybarn are regarded as misplaced because of the opportunities for cross-selling.

there is also a belief that the satsuma online lending operation should be part of the future.

as Yankees baseball manager Yogi Berra observed: ‘the game ain’t over till it’s over.’

Audit switch

GOldMaN sachs is to tread where other big global corporations fear to go.

It has appointed the uk’s eighth largest accounting firm Mazars as auditor of uk and european operations. It chose Mazars after citing conflicts with the big four, all of which supply the investment bank with consulting services. Pwc remains group auditor.

after foul-ups by the big four – kPMG, eY, Pwc and deloitte – the tide is turning.