Thomas Cook Set to Drop Out of FTSE 250

Wednesday, 5th December 2018

The company issued a fresh profit warning last week, and as a result saw share prices fall by 30%. It announced that it had made a £186 million annual loss. The company’s share price has fallen by 80% so far this year, and 60% in the last week.

The company now has a market capitalisation that is below its current level of debt. While the company insists that its future is secure, IHSMarkit Data shows that the cost of insuring the company’s debt, which is in excess of £380 million, has soared in recent weeks.

The company’s five year credit default swap, which reflects the cost of protecting the company against a default, increased by 73 basis points, to 1,071. This equates to a 60% implied probability of default.

The company is facing many challenges because of the uncertainty surrounding Brexit. Those who think that Brexit could be dangerous for the travel sector are unlikely to want to buy into Thomas Cook, and given that airlines are having their own troubles and there are more worries over the possibility of airline collapse at the moment, the whole sector is in a precarious situation. Thomas Cook maintains that lenders remain supportive, and that it has secured additional flexibility this year to manage its debt situation.

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