TCG borrowing request

All,

Thomas Cook are looking to raise their borrowing capacity by changing their Articles of Association. We did not anticipate a change here, but in light of the current trajectory, the company would probably be passing whatever level had been set (2x adjusted capital reserves). See attached for the articles.
Thoughts: It should not constitute big news to anyone, but perhaps the odd bull will be looking to sell now. Also, it does not look like the airline sale is particularly close - again, it was not expected to take place before summer / year end anyhow.
Tomas is your analyst.

Wolfgang

Extract:

122. Borrowing powers

(A) The Board may exercise all the powers of the Company to borrow money, to guarantee,

to indemnify, to mortgage or charge all or any part of the undertaking, property and

assets (present and future) and uncalled capital of the Company, to issue debentures

and other securities and to give security, whether outright or as collateral security, for

any debt, liability or obligation of the Company or of any third party.

(B) The Board shall restrict the borrowings of the Company and exercise all voting and

other rights or powers of control exercisable by the Company in relation to its subsidiary

undertakings (if any) so as to secure (but as regards subsidiary undertakings only in so

far as by the exercise of the rights or powers of control the Board can secure) that, save

with the previous sanction of an ordinary resolution, no money shall be borrowed if the

aggregate principal amount outstanding of all Net Borrowings by the group (exclusive of

Net Borrowings owing by one member of the group to another member of the group)

then exceeds, or would as a result of such borrowing exceed, an amount equal to 2

times the Adjusted Capital and Reserves.

For the purposes of this paragraph of this Article:-

(i) “ Adjusted Capital and Reserves” means the aggregate from time to time of:-

(a) the amount paid up on the issued share capital of the Company

(including any shares held as treasury shares),

(b) the amount standing to the credit of the reserves of the Company

including any share premium account, capital redemption reserve and

retained earnings,

all as shown by the then latest audited balance sheet but after:-

subsisting at the date of that audited balance sheet except to the extent

that a deduction has already been made, and

(d) making such adjustments as may be appropriate to reflect any variation

in the amount of the paid up share capital, share premium account,

capital redemption reserve or other reserve since the date of the

audited balance sheet;

(ii) if the amount of the Adjusted Capital and Reserves is being calculated in

connection with a transaction involving a company becoming or ceasing to be a

member of the group, the amount is to be calculated as if the transaction had

already occurred;

(iii) “ Net Borrowings” means borrowings and the following except in so far as

otherwise taken into account:-

(a) the nominal amount of any issued and paid up share capital (other than

equity share capital) of any subsidiary undertaking beneficially owned

otherwise than by a member of the group,

(b) the nominal amount of any other issued and paid up share capital and

the principal amount of any debentures or borrowed moneys which is

not at the relevant time beneficially owned by a member of the group,

the redemption or repayment of which is the subject of a guarantee or

indemnity by a member of the group or which any member of the group

may be required to purchase,

accepting house under any acceptance credit opened on behalf of and

in favour of any member of the group,

(d) the principal amount of any debenture (whether secured or unsecured)

of a member of the group beneficially owned otherwise than by a

member of the group,

(e) any fixed or minimum premium payable by a member of the group on

final repayment of any borrowing or deemed borrowing, and

(f) the minority proportion of moneys borrowed by a member of the group

and owing to a partly-owned subsidiary undertaking;

but do not include:-

(g) borrowings incurred by any member of the group for the purpose of

repaying within six months of the borrowing the whole or any part of any

borrowings of that or any other member of the group outstanding at the

relevant time, pending their application for that purpose within that

period,

(h) borrowings incurred by any member of the group for the purpose of

financing any contract in respect of which any part of the price

receivable under the contract by that or any other member of the group

is guaranteed or insured by the Export Credits Guarantee Department

or by any other governmental department or agency fulfilling a similar

function, up to an amount equal to that part of the price receivable

under the contract which is so guaranteed or insured,

(i) borrowings of, or amounts secured on assets of, an undertaking which

became a subsidiary undertaking of the Company after the date as at

which the latest audited balance sheet was prepared, to the extent their

amount does not exceed their amount immediately after it became such

a subsidiary undertaking, or

(j) the minority proportion of moneys borrowed by a partly-owned

subsidiary undertaking and not owing to another member of the group;

and, in calculating Net Borrowings, there shall be deducted: -

(k) an amount equal to the aggregate of:

(1) all amounts which are deposited with a person who is not a

member of the group and are repayable on demand; and

(2) investments which are readily convertible into known amounts

of cash,

in each case beneficially owned, directly or indirectly, by a member of

the group;

(iv) “ audited balance sheet” means the audited balance sheet of the Company

prepared for the purposes of the Companies Acts for a financial year unless an

audited consolidated balance sheet dealing with the state of affairs of the

Company and its subsidiary undertakings required to be dealt with in group

accounts has been prepared for those purposes for the same financial year, in

which case it means that audited consolidated balance sheet, and in that case

all references to reserves shall be deemed to be references to consolidated

reserves;

(v) the Company may from time to time change the accounting convention on

which the audited balance sheet is based provided that any new convention

adopted complies with the requirements of the Companies Acts; if the Company

should prepare its main audited balance sheet on the basis of one convention,

but a supplementary audited balance sheet on the basis of another, the main

audited balance sheet shall be taken as the audited balance sheet;

(vi) “ the group” means the Company and its subsidiary undertakings (if any);

(vii) “ the minority proportion” means a proportion equal to the proportion of the

issued share capital of a partly-owned subsidiary undertaking which is not

attributable to a member of the group;

(viii) to calculate the aggregate amount of Net Borrowings on a particular date, any

relevant monies denominated or repayable in a currency other than sterling

shall be notionally converted into sterling either: -

(a) at the rate of exchange quoted by a clearing bank specified by the

Board at the close of business in London on the business day

immediately preceding the day on which the relevant calculation of Net

Borrowings is made; or

(b) at the rate of exchange specified in any forward purchase contract,

currency option, back-to-back loan, swap or other arrangements taken

out or entered into to reduce the risk associated with fluctuations in

rates of exchange in respect of repayment of such monies; and

(ix) a certificate or report by the auditors as to the amount of the Adjusted Capital

and Reserves or the amount of Net Borrowings or to the effect that the limit

imposed by this Article has not been or will not be exceeded at any particular

time or times shall be conclusive evidence of that amount or of that fact.

Wolfgang Felix12 April 2019THOMAS COOK