Thomas Cook unfazed by insurer downgrade

Thomas Cook unfazed by insurer downgrade

Thomas Cook has dismissed the significance of a decision by credit insurer Euler Hermes to pull cover on new bookings made by third-party retailers as it confirmed advanced talks with banks to extend its financing agreements.

The company said Euler Hermes covered only “a limited number of third-party travel providers” to its UK business.

The move is understood to have been taken in mid-March and followed a reduction in Euler’s level of credit insurance cover in December. Credit insurance would protect trading partners in the event of Thomas Cook becoming insolvent.

A Thomas Cook spokeswoman insisted: “No product has been removed from sale and no [retail partner] has stopped trading with us.

“The group continues to make steady progress and it is not unusual for this type of thing to happen. Our banks and other suppliers remain supportive.”

The credit insurer refused to comment on its actions regarding Thomas Cook, but said in a statement: “Euler Hermes closely monitors the performance of all UK companies, including Thomas Cook.

We continue to support the travel industry by writing significant levels of cover. We enjoy a healthy and constructive dialogue with Thomas Cook’s senior management and advisers, and will review any information that is forthcoming about its current and future position.” It would not comment further on the issue.

The Sun has reported this morning that there are concerns among unnamed ‘Cook staff’ about the ability of travel firms and other suppliers to continue to work with it given Euler Hermes’ decision.

Under the headline ‘Insurance bombshell for Thomas Cook’ the tabloid reported claims, vehemently denied by the company, that essential items like fuel supplies to its airline were under threat. 

Thomas Cook confirmed on Monday that it was in advanced talks with its banking group over an extension to its financing arrangements.

The statement followed reports that Cook was close to an agreement with Royal Bank of Scotland and Barclays that would see it extend the maturity of its bank loans to 2015 and receive new loan conditions.

A statement from Cook said: “These discussions are part of the result of the strategic review the group has undertaken since agreeing terms of a new facility in November 2011.”

Cook saw a sharp jump in its share price in the wake of the weekend disclosure of the refinancing deal.

Shares tumbled below 10p at the end of last year following a series of profit warnings but rose 15% to 23.6p following confirmation of talks over its £1.2 billion debts.

The deal is likely to come at price as the banking syndicate is expected to demand higher interest charges, more one-off fees and a 5% share stake.

The group is also exploring the sale and leaseback of aircraft as part of a disposal programme that could also see it offload its stake in Thomas Cook India.

But Simon French, of Panmure Gordon stockbrokers, told the Press Association: “The key issue is that even after these steps the group has too much debt and too little operating cashflow.”

Talks involving the banks and interim chief executive Sam Weihagen are likely to be completed in the coming weeks, with a strategic review due to be announced by the time of its interim results before the end of May.

The company has still to appoint a chief executive following the departure of Manny Fontenla-Novoa last summer.


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