Bloomberg News

Thomas Cook Soars After Lenders Provide Additional Funding

November 29, 2011

(Closes shares in first and second paragraphs.)

Nov. 28 (Bloomberg) -- Thomas Cook Group Plc rose 21 percent in London trading after banks agreed to provide a loan that will give Europe’s second-largest tour operator time to reorganize its business.

The shares gained 3.71 pence to 21.73 pence as of the 4:30 p.m. close and have now recouped almost half of the 75 percent drop on Nov. 22, when the company said it was in talks with banks and delayed its annual results. Evolution Securities raised its recommendation to “neutral” from “sell.”

Thomas Cook said late on Nov. 25 that its lenders agreed to provide a 200 million-pound ($311 million) loan, which will be available until April 30, 2013. That eased concern about the company’s financial position after political unrest in North Africa and a squeeze on consumer spending in the U.K. hurt holiday bookings ahead of the seasonal low period of cash.

“Although the new facilities provide some short-term relief, we do not believe that it is necessarily a long-term confidence vote in the group,” Greg Johnson, an analyst at Shore Capital, wrote in a note to investors today. “Longer- term, we still expect the business to shrink materially, assets disposed and potential fresh capital raised, which are likely to lead to significant deterioration in earnings.”

The new agreement with lenders replaced a 100 million-pound line announced last month. The banks also agreed to further relax some covenants on existing credit lines.

Strategic Review

“Fortunately, all the bad press has come at a relative low-point in the booking cycle and the group has the funds and time to restore partner and consumer confidence in its brand and survival,” Evolution analyst James Hollins said in a note.

The company’s board, led by interim Chief Executive Officer Sam Weihagen, said it plans to undertake a strategic review.

Thomas Cook said in August it had the potential to generate as much as 200 million pounds within the next 18 months from selling assets such as hotels and office buildings.

The tour operator’s delayed full-year results will be released the week of Dec. 12. So-called headline operating profit for the year ended Sept. 30 is expected to be “broadly in line” with previous guidance of about 320 million pounds, Thomas Cook said in a statement on Nov. 22.

Shares of larger competitor Tui Travel Plc also rose today, gaining 3.5 percent to 160 pence.

“TUI Travel is likely to see some benefit from a “flight to quality” on bookings,” said Shore Capital’s Johnson.

--Editors: Paul Jarvis, Tom Mulier

To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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