Debt fears mount for Thomas Cook

ShareS in troubled Thomas Cook crashed again amid fears over its £389m debt mountain.

The holiday group’s stock fell another 21.5pc, or 6.46p, to a sixyear low of 23.64p – taking losses since May this year to 84pc.

The slump has slashed the travel company’s value from £2.2bn in May to just £364m – less than the size of its debt.

and Thomas Cook looks likely to be ejected from the FTSe 250 index of mid-cap companies.

a fire sale by fund managers, who are only allowed to hold FTSe 250 stocks, is thought to have been partly responsible for the fall.

Berenberg analyst Stuart Gordon has downgraded the stock to a ‘sell’ rating and warned Thomas Cook shares are ‘uninvestable’.

he said it may have to raise more cash on the stock market and that the price could fall as low as 12p, a further drop of almost 50pc.

Thomas Cook was pummelled by the summer heatwave, with many families choosing to stay in Britain rather than travelling abroad. More concerning still is its mounting debt pile, which has ballooned from £40m to £389m in just 12 months.

Last week boss Peter Fankhauser said: ‘2018 was a disappointing year for Thomas Cook, despite achieving some important milestones in our strategy for transforming the business.’

Laith Khalaf of trading firm hargreaves Lansdown said: ‘It’s clearly been a pretty horrible year for Thomas Cook investors. If you’ve got a business that has a fair amount of debt on the balance sheet, a trading slowdown can be particularly punitive.

‘The Christmas trading season is going to be important.’

Thomas Cook is 176 years old, invented the package holiday and has around 22,000 staff selling holidays to getaways ranging from Lanzarote to Lapland. But the company has been forced to issue two profit warnings in recent months and investors are concerned about its future.

There are fears that traditional tour operators could be swept away by internet disruptors as more and more people look for niche holidays online.

Internet travel agent On the Beach, which is listed on the aIM junior stock market, is now worth £180m more than Thomas Cook, despite only launching in 2004.

Thomas Cook swung to a £163m loss in the year to September 30, down from a £9m profit for the previous 12 months.

The business shut 100 shops in a battle to cut costs, just two years after buying them as part of a £55.8m deal with Co-op Travel.

The store closures are thought to have affected about 600 staff.

There are even calls to break the business up, with Barclays analysts suggesting its airline should be hived off from the tour operator arm.

any money raised could then be used to pay down debts. The Barclays analysts added: ‘With concerns around the UK economy, earnings may continue to disappoint.’