Thomas Cook gets a 200-mn pound lifeline

Thomas Cook (India) Ltd. | Travel Services | Travel & Hospitality | BSE: 500413 | NSE: THOMASCOOK

29 Nov 2011 Evaluate

UK-based travel and leisure specialist, Thomas Cook Group, was handed a £200 - million credit by a consortium of banks led by Barclays that would help the group tide over its debt crisis, currently estimated to be in the region of £1 billion. The fresh line of credit provides the group with much increased headroom to deal with unexpected events and the effects of an uncertain economic environment. The group’s banks, led by Barclays, HSBC, RBS and UniCredit, have agreed to provide a new £200-million facility available until April 30, 2013, which replaces the £100-million short-term facility announced on October 21.

In addition, the banks have agreed a further relaxation of the financial covenants under the existing facilities. Last week, the company was taking steps to reduce its debt and reach a more appropriate capital structure over time. The group would also undertake a strategic review, which may possibly include selling some parts of its business. No firm decision has been taken regarding this. Apart from its core business of travel and leisure, the group also has presence in travel credit and insurance. The initial interest margin over Libor payable on the new facility would be five per cent per annum, increasing by 0.5 per cent per annum each quarter. The arrangement and participation fees with respect to the new arrangements will cost £10 million.

The existing credit facilities comprise a £150-million amortising term loan and a £850- million revolving credit facility which mature in May 2014. The interest margin on these facilities remains unchanged. In addition to the existing term and revolving facilities, the group has £200 million of committed bilateral bonding and guarantee facilities provided by seven banks that are covered by the new amended agreement, which is unsecured and principally for consumer protection. The company’s current strained finances was partly due to the winter season, the weakest time of the year for travel business. The Arab spring and euro zone crisis had further hit its business as consumers travelling to these regions have postponed their plans. The largest chunk of the company’s business comes from the UK, Ireland, India and West Asia, that account for 35 per cent of its £9-billion annual revenues.