Thomas Cook Memo 040619
- Understand the various going-concern break-up and administration / CVA scenarios for Thomas Cook
- Understand whether there is a viable tour operator business that can be salvaged
- Understand how to model working capital and liquidity
- Understand the value of the Group Airline business and its constituent airlines
- Understand the value of the Northern European business
- Understand the potential synergies for Fosun in owning both Thomas Cook’s Group Tour Operator and FTG’s Club Med business
- Understand the potential working capital shock from changing hotel supplier payment terms, withheld customer pre-payments by credit card companies and lower customer bookings
- Understand what Thomas Cook needs to do rapidly and aggressively to maintain its existence
- Understand how much upside there is from the own brand hotel strategy, complementary offering of Expedia’s city breaks and a more radical approach to shifting channel mix from stores to online
- Understand the Pro Forma financial position of the continuing Group Tour Operator post any sale of the Group Airline and/or Northern Europe business
- Understand the asset sale covenant in the senior unsecured bonds
- Understand the different recovery rate scenarios across administration / CVA depending on priming and timing of default
- Understand the potential tactics of active distressed investors
- Quarterly liquidity projections based on a detailed working capital model
- Valuation of the Group Airline and its constituent airlines
- Valuation of the Northern Europe business
- Insight into Fosun’s Club Med business and potential synergies with Thomas Cook
- Granular Adj EBITDA estimates across the business – within the Group Tour Operator: across source markets; across hotel formats; within the Group Airline: across the regional airlines
- Recovery rate estimates
- Key valuation sensitivities
- Customer price comparison analysis – Thomas Cook vs Tui, On The Beach and unbundled package components (hotel, flight and ancilliaries)
- When will Thomas Cook run out of liquidity including with an extreme working capital shock in H2 2019?
- What are the different parts of the business worth in a break-up, who would buy them and why?
- Is there more margin pressure to come from structural decline / online price transparency?
- What is the valuation upside if Thomas Cook can sell sufficient businesses to generate liquidity and time to execute its own brand hotel strategy?
View, Variant Perception & Recommendations
- Business Overview
- What Went Wrong In H1 2019 & H2 2018?
- Structural Decline?
- Financial Projections, Valuation & Sensitivity Analysis
On The Beach