Thomas Cook’s Lenders Face Lengthy Wait For Tiny Payout

(Bloomberg) -- Thomas Cook Group Plc’s grounded planes ruined thousands of holidays. They’re also likely to disappoint creditors waiting to get some of their money back after liquidators sorting through the company’s wreckage sell them off.

The travel group’s compulsory liquidation this week put it under the control of a government-appointed receiver and consultants AlixPartners and KPMG. They’re responsible for stripping the company down into sellable parts in order to return as much cash as possible to creditors.

There won’t be much though. An analysis by AlixPartners in August estimated bondholders could get as little as 2% of their money. The assessment was less gloomy for lenders, who may enjoy a recovery rate of almost 17%. But even that assumes the receiver can sell Thomas Cook’s assets at a decent price, which may be difficult.

S&P Global Ratings on Tuesday put the recovery value as high as 10% on the group’s unsecured bonds but warned investors could also get nothing. Creditors will be competing with other claims on funds including aircraft financing contracts and pension obligations, according to the ratings firm.

At the time of Thomas Cook’s liquidation in the early hours of Monday, the travel agent was operating almost 120 planes and held more than 1,500 weekly airport slots in Britain, Germany and Scandinavia.

But most of Thomas Cook’s planes are leased from other companies. AlixPartners said Thomas Cook and its subsidiaries, some of which are still operating, owned just 22 aircraft, but those are mostly old and may not fetch much of a price, according to Neill Keaney, a senior analyst at CreditSights. Based on data from aviation consultancy Cirium, Thomas Cook’s aircraft “will probably yield less than 100 million pounds.”

Landing rights could be another source of cash. S&P says it’s hard to assess their value, but liquidators could auction some of Thomas Cook’s 208 weekly peak-season slots at London’s crowded Gatwick Airport, among the most sought-after in Europe.

U.K. carrier Monarch Airlines won the right to exchange landing permits in the wake of its own 2017 collapse after winning a court case. Selling airport slots may not be possible in locations where landing rights revert back to the aviation authority when an airline ceases to operate.

Thomas Cook’s global reach adds a further complication as multiple jurisdictions will need to recognize the U.K. insolvency process.

Other potential sources of funds to repay lenders include receivables -- or money owed to the firm -- inventories and cash paid on deposit for holiday bookings, according to S&P.

Thomas Cook’s hotels may also hold some worth. The company has invested in resorts like the Aldiana chain and launched the upmarket Casa Cook brand with a boutique hotel opened in Ibiza only two months ago.

Airline Condor, which is partially owned by Thomas Cook, continues to fly after receiving a rescue loan from the German government. The firm’s Scandinavian tour operators and air carrier are also still operating.

The liquidators are unlikely to extract much value from Thomas Cook’s brand even if the name dates back 178-years. Hundreds of thousands of stranded customers have left a publicity disaster that may rule out any sale. Fitch said on Tuesday that Thomas Cook and other brands have “little or no value” in liquidation.

Creditors also face a long wait to find out how much money they’ll recover if other recent U.K. liquidations are anything to go by.

Almost two years after the collapse of builder Carillion in January 2018, its lenders are still waiting for their first payouts from the liquidation.

“Disentangling complex businesses like Carillion and Thomas Cook takes time,” said Julie Palmer, managing partner at restructuring specialist Begbies Traynor. “It will be a slow operation that will require years.”

--With assistance from Christopher Jasper, Antonio Vanuzzo, Richard Weiss and Siddharth Philip.

To contact the reporters on this story: Luca Casiraghi in London at lcasiraghi@bloomberg.net;Irene García Pérez in London at igarciaperez@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Chris Vellacott

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