16th Jul 2019 17:09
(Correcting that the GBP750 million funding would come from not just Fosun, but also some of Thomas Cook's current lenders.)
(Alliance News) - Moody's Investors Service has cut several of Thomas Cook Group PLC's ratings as the travel operator looks to secure funding from a major shareholder.
On Friday last week, Thomas Cook said it was in talks with Chinese shareholder Fosun Tourism Group, already the firm's largest shareholder with 18%, for a GBP750 million injection from Fosun and "core lending banks".
The investment would see a reorganisation of the Tour Operator and Airline businesses, leading to Focus having a "significant" minority interest in the airline.
On Tuesday, Moody's cut Thomas Cook's corporate family rating to Ca from Caa2 and the probability of default rating to Ca from Caa2.
The rating for Thomas Cook's EUR750 million notes due 2022 has also been cut to Ca from Caa2, and the same has happened for the EUR400 million notes due 2023.
The outlook for Thomas Cook remains negative, credit rating agency Moody's added.
The new corporate family rating reflects weak liquidity and trading, expected cash outflows, and forecast debt impairments. However, they are also based on Thomas Cook's position as a large tourism business, a diverse product offering, and good long-term prospects for the travel market.
"The proposed restructuring and injection of new funds is required as a result of liquidity constraints and a failure to achieve the sale of the airline division to support liquidity," said Moody's.
"Moody's expects the restructure to include the separation of the airline and tour operator divisions to allow EU investors to retain majority ownership of the airline, a regulatory requirement."
"Moody's expects a substantial impairment for existing debtholders given the requirement for new money and the possibility that existing debt could be subordinated in part to new financing," it continued.
Ratings could be upgraded by Moody's if only limited debt impairments are made, while a downgrade would come if debtholders look like they will not get much of a return.
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