Cook refinancing brings relief but risks remain, says City

Cook refinancing brings relief but risks remain, says City

Leading City leisure analysts have broadly welcomed Thomas Cook’s £1.4 billion new financing package agreed over the weekend.

Investec Securities’ James Hollins gave an upbeat view, saying the group’s survival was now assured helped by the potential for a further £180 million in disposals of hotels and possible aircraft sale and leaseback.

He said that “our bullish view on the company’s long-term survival has been partially vindicated”.

Morgan Stanley analyst Jamie Rollo said he was “confident” Cook had bought enough time to survive the next couple of years.

“On balance we see this announcement as positive for Thomas Cook Group but negative for Tui Travel, which is now less likely to benefit from a vanishing competitor,” he said.

“The company says it is making good progress on the search for a new CEO and we understand the well-regarded internal candidate Peter Fankhausen is still in the running.”

A note from Citi Equities was less optimistic about Cook, saying: “The key near-term risk issue with tour operators is the unreliability of forecasting.

“The annual results depend on the summer season and can only be predicted with any accuracy in the final month of the fiscal year.

“Going forward we see the key risk for the group arising from poor capacity management and/or impact from a weaker consumer. We believe either could have a negative impact on earnings.

“The recently launched UK strategic review and acquisition of Co-op retail stores could deliver incremental cost savings to the group that are not factored into our forecasts.

“In addition we expect the group to be close to debt covenants during the seasonally weak winter period. While management is optimistic of a resolution to this issue, risks remain.”

Barclays Leisure said Cook still had much to prove regarding the turnaround of some of weaker businesses “but for now the reassurance on financing will likely provide some relief”.


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