Thomas Cook - looking for another £400m of debt

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According to Sky news: https://news.sky.com/story/struggling-thomas-cook-flies-towards-400m-bank-deal-11710248 E&Y have ordered TCG to go raise another £400m if they want sign-off on the H1 interims report. E&Y conduct a “General Review” of TCG’s half-year figures. 

Thoughts:

- Failure to obtain such sign-off could well have deep ramifications among customers. The company is due to report those figures on May 16th. We don’t know if failure to produce sign-off is a trigger under the RCF (not standard, but perhaps possible, given the seminal nature of any substantial reporting and the significant seasonality). The bond documentation makes no reference to independent reviews of this kind.

- Having read again the debt insurance language, we come to the conclusion that TCG will have to ask bondholders for a waiver. The bonds provide a maximum carve out for any Credit Facility and Commercial Paper of up to £1bn and £400m respectively on current metrics. Both appear fully used.

- Clearly resining another £400m p.p. to current RCF/bonds is out of the question. So bondholders should start factoring in a further £400m super senior - presumably with a charge over receivables or other assets. 

Clearly the trade continues to do well. However, there are a number of loose items we are chasing in connection with the recent news flow. Tomas is your analyst.

Wolfgang