• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Chinese Rescue Called Off as Thomas Cook, World's Oldest Travel Co., Collapses

Thomas Cook has entered liquidation despite a US$1.1 billion bailout offer, after its Chinese white knight, banks and the British government said no to more funds.
By ALEX FREW MCMILLAN
Sep 23, 2019 | 10:10 AM EDT

The world's oldest travel company will not be rescued by an infusion of Chinese yuan after all.

Thomas Cook (TCKGY) collapsed on Monday, as last-minute talks to secure a rescue by the Chinese conglomerate Fosun and then the British government collapsed.

The company's shares were frozen in London on Monday at £3.45, having fallen from £320 per share when its current corporate iteration was created in 2007.

Thomas Cook and its subsidiaries have now entered compulsory liquidation, and the company says on its Web site that it has "ceased trading with immediate effect," cancelling all future flights and holidays that its clients had booked.

The Conservative-led British government refused to extend a £150 million (US$187 million) lifeline to the tour operator.

Fosun had in July entered "advanced discussion" to pay half of a £900 million (US$1.1 billion) bailout of the company with its lenders. That would have been one of the largest-ever investments into a British business by a Chinese company.

Fosun, which counts the hotel chain Club Med among its holdings, was to put up £450 million (US$562 million) as part of the rescue, for which it was due to get 75% of Thomas Cook's tour operator and 25% of its airline.

Banks and bondholders in the company were due to contribute another £450 million to convert their debt holdings to equity. That would have given them 25% of the tour business and 75% of the airline.

Even US$1.1 billion turned out not to be enough. Thomas Cook's management met with its lenders and creditors in London on Sunday to try to agree an additional £200 million (US$250 million) in funding, to keep the company going over the winter, when it gets fewer customers.

When negotiations with the lenders broke down, the company requested £150 million in bailout money from the British government. Although labor unions and the left-leaning opposition party Labour were in favor, the pro-business Conservative administration refused, saying it was not in the national interest.

Thomas Cook, which was founded in 1841, has struggled under a US$2.1 billion debt load since a previous restructuring. That left it needing to sell around 3 million packages every year just to service the debt. It serves around 19 million customers each year.

The bailout was not much of a rescue for long-suffering shareholders in the company, which used to be a member of Britain's blue-chip FTSE 100 index. Their holdings would have been "significantly diluted" as part of the recapitalization, Thomas Cook admitted.

The British government is now covering the cost of repatriating 150,000 Thomas Cook travelers who are already on vacation. That's the largest peacetime evacuation of Brits in history. Even by wartime standards, it's massive, around half the number pulled out from the French coast at Dunkirk at the start of World War II.

But the company, which is synonymous with package tours for most Brits, has a total of around 600,000 customers overseas at the moment. Non-Brits will have to seek help from their own governments. The majority of those nationals are from Germany or Scandinavia.

Britain's Civil Aviation Authority is now charged with cleaning up the mess for the Brits. It has set up a special Web site for affected travelers. The CAA says it will complete the repatriations by Oct. 6. It states that passengers should not go to the airport until their alternative flight is confirmed. It is also attempting to cover the cost of remaining accommodation for those already on vacation.

All flights and holidays from Sept. 23 onward with Thomas Cook are cancelled. Those customers should try to claim their costs back from travel insurance, their credit card or their bank, the CAA says. Holidaymakers who booked a Thomas Cook package deal are covered by insurance under Britain's Air Travel Organiser's License, which protects their accommodation costs and return flights.

It cost the British taxpayers £50 million (US$62 million) to repatriate 80,000 travelers when the budget airline Monarch went under in 2017. So, the bid to bring the Brits back home this time around will not be that much smaller than the sum the company requested to stay afloat. Prime Minister Boris Johnson is no doubt keen to toe a tough line on corporate failures as he prepares to withdraw Britain from the European Union, itself a supremely costly and destructive enterprise.

Fosun, which is already the largest shareholder of Thomas Cook at 18%, now faces a total loss on its holding, like its other shareholders. Debt and bond holders will do little better.

Hong Kong-listed Fosun Tourism (HK:1992), the subsidiary due to make the investment, closed down 4.7% on Monday, on a day the benchmark Hang Seng index lost 0.8%.

Fosun Tourism's shares have lost 19.3% since word of the Thomas Cook rescue surfaced. But this summer of discontent in Hong Kong has explained most of those woes with the Chinese company, with mainland visitors to the city sharply down.

The collapse of a major rival should be a boost to the German travel agency and tour operator TUI AG (TUIFY) . Its shares rose 9% in early Monday trade although they have tempered those gains as the day goes on.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Bankruptcy | Investing | Stocks | China | Europe

More from Stocks

As We Come Back From July 4, Market Fights a Hangover

James "Rev Shark" DePorre
Jul 5, 2022 4:22 PM EDT

After a rough start, we saw strength in some sectors that had taken it on the chin.

What's the Next Move for Crude Oil?

Bruce Kamich
Jul 5, 2022 3:30 PM EDT

A temporary break in oil prices, along with lower interest rates, could be a near-term positive for equity prices.

Can Nvidia Rally and Help the Tech Sector Recover?

Bruce Kamich
Jul 5, 2022 3:00 PM EDT

Why Tuesday could mark the start of a turnaround.

Tesla's Charts Are Resisting a Downside Break

Bruce Kamich
Jul 5, 2022 1:54 PM EDT

Here's what aggressive traders could do.

We Can't Predict the Rest of 2022, but We Must Have a Game Plan

Brad Ginesin
Jul 5, 2022 1:30 PM EDT

Many are forecasting bad times ahead, but are they going to extremes? Here's my strategy for the the second half of the year.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:01 PM EDT PAUL PRICE

    A Recent Director Buy in Children's Place (PLCE)

    Four of the most recent insider trades in Children...
  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login