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Thomas Cook Finally Gets Its Rescue. Here’s What Analysts Say

Shareholders “may have to accept that their investment could be worthless,” said Russ Mould.

Thomas Cook Finally Gets Its Rescue. Here’s What Analysts Say
A pedestrian passes a Thomas Cook Group Plc travel agency store in Three Bridges, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

(Bloomberg) -- Thomas Cook Group Plc shares tumbled as details of a 900 million-pound ($1.1 billion) rescue led by Chinese investor Fosun Tourism Group confirmed that holders of the British tour operator’s stock face being virtually wiped out.

Thomas Cook Finally Gets Its Rescue. Here’s What Analysts Say

Shareholders “may have to accept that their investment could be worthless,” said Russ Mould, investment director at broker AJ Bell. Thomas Cook said Wednesday that the bailout will leave Fosun holding at least 75% of its main holiday business and around 25% of its airline division, with lenders controlling the rest of the airline and as much as 25% of new equity in the tour unit.

The stock dropped as much as 19%, taking its decline to 93% over the past 12 months. Bonds surged with the 6.25% note maturing in 2022 rising as much as 49% to ~30.56 euro cents, according to CBBT prices.

Thomas Cook Finally Gets Its Rescue. Here’s What Analysts Say

Here’s a summary of what analysts and investors are saying:

AJ Bell, Russ Mould

  • Wednesday’s stock price decline shows investors are trying to crystallize any value left before the refinancing, “for fear there could be nothing left if they wait.”
  • Intention to keep listing “seems a bit odd” as liquidity could be very low, but may provide reassurance to Fosun or lenders that they have an exit route in future.

Citi, James Ainley

(Sell)

  • Expects 350 million pounds of new shares to be issued as bank debt and bonds converted into equity.
  • Keeps 3 pence price target based on current margins and interest costs, although valuation may change when details of profit split are given post re-capitalization.

Barclays, James Rowland Clark

(Equal-weight)

  • Announcement is in line with guidance on the total refinancing value, which was updated to 900 million pounds in early August.
  • The “new news” is the split of 450 million pounds from Fosun and 450 million pounds from creditors, and the proposed ownership split.
  • Price target 17 pence

Stifel, Mark Irvine-Fortescue

Rating under review

  • Recapitalization should provide enough liquidity headroom for the business to trade through the winter.
  • Airline is likely to be put up for sale again at some point, which makes for an uncertain relationship with the tour operator.

--With assistance from Kit Rees, William Canny, Ivan Edwards and Vivianne Rodrigues.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis

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