16 May 2019 by jbchevrel
Thomas Cook Group PLC (TCGLN) credit swap jumped to 52% intra day before reverting to high-40s on the 5y. In cash, the €750m 2022s fell -17c before retracing +3c, after the company results as of end of March19. H1 adjusted EBIT came at -£245m. Net debt jumped +40%y @ £1.3b from £0.9b. TCG effectively tapped £0.6b from its existing revolver. They made a £1.1b goodwill impairment on their UK business relating to 2007 m&a. Liquidity-wise, they said they will get a £0.3b rescue loan – contingent to making progress on selling their airline (9 months: Oct19-Jun20, secured so potentially less assets for other creditors if insolvency). So basically, there will be no sure new funding by then… There were reportedly multiple bids for airline. LHA, Virgin, Ryanair were mentioned as potential bidders. The share of TCGLN is at the lowest since 2012, so market cap is now just £0.3b... Contrasting with peer TUI, H2 profit outlook looks dull. Bookings for coming summer are -12%y. Airline bookings -6%y. Recent uncertainty bolstered promotional activity, higher fuel prices still weigh on margins and Brexit process can make some UKs delay their holidays. Plus, TCGLN noted weakness in key North Europe market due to a ‘backlash against air travel’ (which I find surprising given the relative proportion of sea/bridges in that part of the world...). US-Turkey tensions could also weigh on sentiment, given that Turkey is a big package holiday destination. Today an official said the delivery of Russian missile system S-400 is going on according to the planned timeline. No change there. Nevertheless, noise around M&A talks (for the airliner arm) is probably going to dominate price action in the coming weeks, as it was the case on last April 23rd, when I last commented on TCGLN, in DataGrapple.