BUSINESS NEWS


COLLAPSE


THOMAS COOK


Inherited debt of £1.6bn to blame for Cook failure


Cook failed when it might have survived, but for how long? Ian Taylor reports


Tomas Cook had seemed set to survive until last week, yet its collapse did not come as a surprise. Te group faced one of only


two possible outcomes – a deal or collapse – from the moment in May when it announced its banks had agreed a £300 million credit facility on condition that the group sell its airline. Te implication was clear – Tomas


Cook would not survive beyond September without fresh capital. Te announcement came in half-


year results that were stunningly bad owing to a £1.1 billion write-down of


80 26 SEPTEMBER 2019


goodwill on a deal – the takeover of MyTravel – completed 12 years earlier. Cook hoped to earn £800 million


or more from selling its airlines to pay down the £875 million the group owed its banks – about half the £1.6 billion debt Cook carried. Yet realising anything like that


amount proved impossible. Ten a lifeline appeared in the form of Chinese group Fosun, already Cook’s biggest shareholder and joint-venture partner. In July, Cook announced a provisional agreement on a deal that would see Fosun and its banks and


bondholders take over the company. Fosun would put in £450 million,


the banks the £300 million already agreed and, the bondholders would swap their debt for equity. Tomas Cook’s tour operations


and airlines would be separated, with Fosun taking 75% of the tour operator and 25% of the airline and the banks the reverse. In August, the banks came back saying Cook needed an additional


Continued on page 78 travelweekly.co.uk


BUSINESS NEWS


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