Thomas Cook CDS thoughts

All,

Whether or not 2019 CDS will be triggered may not so much depend on ‘when' the company restructures, but ‘how'.

Further to a note from GS this morning, we think some of the points have merit:

- A Scheme of Arrangement need not trigger an insolvency and thus need not lead to an event. New Look is indeed the latest example where funds including Sona had to hold-up the restructuring to ensure that CDS would be triggered - meaning that the company would have to fail to pay the coupon and wait for 30 days to let the grace perod pass, then restructure.

- In contrast to New Look, however, the short interest in TCG is much smaller at $253m. GS make the assumption that half to two thirds of that may be on basis and thus $150m may be in the right buckets, or some 11.6% of the outstanding bonds. We agree that this may - given the already low cash price of the bonds - not be enough to drive the restructuring off course.

- Thus there is a fair chance of the following scenarios playing out:

- A Scheme of Arrangement is implemented, but does not trigger a CDS event. => CDS not triggered.

- A Scheme of Arrangement is implemented and a CDS trigger will have to be created. The next chance to do that would be with the Dec19 coupon on the 22s. But the 30 day grace period following non-payment would mean that the Dec19 CDS would still roll off untriggered.

- No agreement can be found among Company, Fosun, banks and bondholders and the company needs to go though administration. => CDS is triggered immediately.

Wolfgang