interestrateripoff

Thomas Cook's £1.2Bn Lifeline

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[url="http://www.guardian.co.uk/business/2012/apr/08/thomas-cook-refinance-deal"]http://www.guardian.co.uk/business/2012/apr/08/thomas-cook-refinance-deal[/url]

[quote]Thomas Cook is close to striking a £1.2bn refinancing deal that will give the troubled travel group two more years' breathing space to turn round its business.

A consortium of 17 banks including Royal Bank of Scotland and Barclays is expected to approve an extension of loans until 2015. Although the conditions are likely to be stringent, with higher interest rates and the lenders taking a significant stake in the company, the deal is regarded as good news by Thomas Cook.

Without the backing of the banks, it would have had to repay the bulk of its debt by April 2013.

Britain's oldest and best-known tour operator appeared to be on the brink of collapse before Christmas after a disastrous year that featured three profit warnings and the departure of its long-serving chief executive. Despite £100m of short-term funding having been secured in autumn 2011, an emergency loan of £200m was needed by late November to keep the firm afloat. Bookings slumped in subsequent months as reports of its financial woes deterred customers.[/quote]

Luckily the green shoots of recovery are here and we'll all be holidaying like mad in a few months...

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[quote name='interestrateripoff' timestamp='1333910526' post='909009191']
[url="http://www.guardian.co.uk/business/2012/apr/08/thomas-cook-refinance-deal"]http://www.guardian.co.uk/business/2012/apr/08/thomas-cook-refinance-deal[/url]



Luckily the green shoots of recovery are here and we'll all be holidaying like mad in a few months...
[/quote]

Educate me if I have this wrong. Presumably they have to increase business just to get back to 'normal' operation, but then actually overshoot this position to get spare funds to pay back this humongous loan. With the present economic situation being dire, and set to get worse, I don't see these people getting to even stage 1.
Why is RBS always involved with failure?

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So are they proposing any changes to their underlying, fundemental business model (primarily, the sale of all-inclusive package holidays that integrate flights on their own short-haul budget airline with brokered hotel bookings), or just to carry on as before, albeit with a bigger website and fewer physical retail outlets, in the hope that things will improve?

If the latter, this assumes that customers will return if and when consumer spending power recovers to mid-00s levels. If it doesn't, and/or their business model is fundamentally shot (i.e. leisure travellers are booking flight/hotel/car components separately and will not return to packages), these extra loans will only delay the inevitable.

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[quote name='interestrateripoff' timestamp='1333910526' post='909009191']
[url="http://www.guardian.co.uk/business/2012/apr/08/thomas-cook-refinance-deal"]http://www.guardian....-refinance-deal[/url]



Luckily the green shoots of recovery are here and we'll all be holidaying like mad in a few months...
[/quote]

It does not sound like that's what anyone expects. They merely get more time to sell whatever assets they can. Then they will go under unless they can come up with a business model that still works.

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Presumably they've presented a convincing case to their backers!

Their sector isn't dead: TUI (which owns Thomson travel among others) is not in trouble. I guess Thomas Cook was already weaker than it should've been (reeling from an ash cloud?) when they were hit by things like lots of North Africa destinations losing their shine.

Not that I know the sector, either as investor or customer!

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[quote name='Errol' timestamp='1333912381' post='909009214']
Extend and pretend. Nothing will have changed in 2 years time.
[/quote]
+1 But Peacocks on the other hand ,had a viable business and the banks shut them out

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State-backed banks have turned out to be a tidy way for the government to keep other 'too big to fail - or if they do will undermine the official everything with the economy is fine narrative' by the state-backed banks forking out loans that no commercial lending outfit would offer. This is taxpayer future earnings being p1ssed away on basket-case corporate's excessive rent, wages and bank interest bills right before your eyes.

If you have a small independent travel agents on a High St struggling to get by and make a profit. A cut of these profits is being demanded under threat of imprisonment only for that money then to be spent on keeping a competitor up the road going.

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[quote name='long time lurking' timestamp='1333913621' post='909009225']
+1 But Peacocks on the other hand ,had a viable business and the banks shut them out
[/quote]

No they didn't and likely still won't - their cost base makes their distribution model uncompetitive.

The financing and lender forebearance they had received would not have been accesible to, for example, a small independent value fashion retailer.

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[quote name='Soon Not a Chain Retailer' timestamp='1333913911' post='909009228']
State-backed banks have turned out to be a tidy way for the government to keep other 'too big to fail - or if they do will undermine the official everything with the economy is fine narrative' by the state-backed banks forking out loans that no commercial lending outfit would offer. This is taxpayer future earnings being p1ssed away on basket-case corporate's excessive rent, wages and bank interest bills right before your eyes.

If you have a small independent travel agents on a High St struggling to get by and make a profit. A cut of these profits is being demanded under threat of imprisonment only for that money then to be spent on keeping a competitor up the road going.
[/quote]

Yes, state backed banks are able to prevent the failure of iconic businesses that would make it feel like the wheels are coming off.

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[quote name='Soon Not a Chain Retailer' timestamp='1333914225' post='909009232']
No they didn't and likely still won't - their cost base makes their distribution model uncompetitive.

The financing and lender forebearance they had received would not have been accesible to, for example, a small independent value fashion retailer.
[/quote]
Well from my understanding they were still in profit and paying there way so if they could of refinanced there debts they would still be in the black the big mistake they made was the leveraged buy out of the share holders it was the interest payments that done the damage

I think the banks saw a chances to recoup the money and took it ,but with TC they have no chance of doing that so extend and pretend it is

I have seen exactly the same with a couple of mates having got behind with the mortgage the one with a 100% LTV and a large amount of NE is on reduced payments the other has a small amount of equity has eight weeks to sell or be repossessed

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[quote name='long time lurking' timestamp='1333920172' post='909009289']
Well from my understanding they were still in profit and paying there way so if they could of refinanced there debts they would still be in the black the big mistake they made was the leveraged buy out of the share holders it was the interest payments that done the damage

I think the banks saw a chances to recoup the money and took it ,but with TC they have no chance of doing that so extend and pretend it is

I have seen exactly the same with a couple of mates having got behind with the mortgage the one with a 100% LTV and a large amount of NE is on reduced payments the other has a small amount of equity has eight weeks to sell or be repossessed
[/quote]

It was mostly PR spin 'bad banks' and all that.

The number of branches ditched post-administration tells you what the real situation was like.

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[quote name='porca misèria' timestamp='1333912971' post='909009219']Presumably they've presented a convincing case to their backers!

Their sector isn't dead: TUI (which owns Thomson travel among others) is not in trouble. I guess Thomas Cook was already weaker than it should've been (reeling from an ash cloud?) when they were hit by things like lots of North Africa destinations losing their shine.

Not that I know the sector, either as investor or customer![/quote]

TUI survived the volcano thing better because they have lots of non-UK operations, especially in Germany, which served routes not effected by the volcano.

In fact there German operations have survived better in General - like the German economy.

[b]A quick reminder to everyone - if you book a holiday, USE A CREDIT CARD. I know you pay a credit card fee, but if anything goes wrong you can be sure of getting your money back.[/b]

Also, don't book with Thomas Cook, they're rubbish...

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[quote name='porca misèria' timestamp='1333912971' post='909009219']
Presumably they've presented a convincing case to their backers!

Their sector isn't dead: TUI (which owns Thomson travel among others) is not in trouble. I guess Thomas Cook was already weaker than it should've been (reeling from an ash cloud?) when they were hit by things like lots of North Africa destinations losing their shine.

Not that I know the sector, either as investor or customer!
[/quote]

TUI is a German company - so their main business is probably still tickety-boo.

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[quote name='RufflesTheGuineaPig' timestamp='1333932492' post='909009368']
TUI survived the volcano thing better because they have lots of non-UK operations, especially in Germany, which served routes not effected by the volcano.

In fact there German operations have survived better in General - like the German economy.

[b]A quick reminder to everyone - if you book a holiday, USE A CREDIT CARD. I know you pay a credit card fee, but if anything goes wrong you can be sure of getting your money back.[/b]

Also, don't book with Thomas Cook, they're rubbish...
[/quote]

Or alternatively (and you do a lot of travelling) buy an inclusive annual insurance policy. All persons going abroad should have insurance anyway. This would usually contain a section on failure of a travel operator.
Cover from a short break to Brighton to walking in the Andes..

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Is this another one of RBS's sound investments? :blink:

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