NO RELIEF IN SIGHT FOR THOMAS COOK
HONG KONG/BRIGHTON, ENGLAND: The UK government signalled it won’t bail out struggling Thomas Cook Group Plc as the struggling tour company carried out lastminute 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 ($250 million) on top of £900 million already agreed in the bailout proposal led by
Fosun Tourism Group, its biggest shareholder.
A person close to the negotiations told AFP on Saturday that the company had failed to find the cash from private investors and would collapse unless the government intervened.
“We will know by tomorrow (Sunday) if agreement is reached,” the person familiar with the matter told AFP.
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 as of March 31, according to data compiled by Bloomberg.
The restructuring proposal is due to be put to a vote on September 27, a crucial step to get the plan approved by a UK court.
The rescue efforts faced multiple challenges. A group of hedge funds began to organise 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.