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A Trip To Hell

04 December 2018 by lberuti

After a heatwave in the UK led many Britons to holiday at home and was blamed for a slump in sales which saw prices for late bookings tumble, TCGLN ( Thomas Cook Group Plc ) have seen earnings plunge. In the past three months, the company has issued three profit warnings and investors have been dumping the stock aggressively, also encouraged by rumours of a possible capital increase. The stock has been roughly halved over the last fortnight – impressive even if it pales in comparison to November 2011 when the stock lost 75% in a day -, but concerns are not limited to the equity market. Bonds are also feeling the heat. Both the 6.25% 2022 and the 3.875% 2023, which were issued 1 and 2 years ago respectively are roughly trading at 70cts on the dollar, while both were trading above par in the summer. It looks as if investors have lost confidence in the ability of the management to turn the business around and produce a sustainable business plan. The credit market estimates that the future of TCGLN is seriously in doubt. At 24% upfront, 5-year CDS referencing the company’s debt put its default probability at two third by the end of 2023.