Thomas Cook Collapse: Big Blow For Historic British Business
The oldest travel company in the world bit the dust in the early hours of 23 September, leaving around 600,000 holidaymakers stranded overseas. We’d already reported on the difficulties experienced by Thomas Cook in a recent post, however, the collapse of the travel firm came as a shock to consumers, employees, and investors alike.
About The Thomas Cook Collapse
The Thomas Cook agency launched over 170 years back when Leicester-based printer and travel entrepreneur Thomas Cook first started operating day trips for locals and experienced new-found wealth as a result of the Industrial Revolution.
The company expanded rapidly and was soon organising overseas tours to destinations such as Egypt and South America.
Through the latter part of the 20th century and into the 21st, the Thomas Cook brand was mainly associated with package holidays and experiences, such as weddings or city breaks.
In 2019, the first public signs of financial difficulties at the major travel brand surfaced during the summer as Thomas Cook desperately hunted around for re-financing.
Even though the banks and principal shareholder Fosun did agree a £900mn “in principle” rescue deal for the business, additional security funding of £200mn was needed to ensure the business could continue trading throughout the quieter winter months of 2019.
Sadly for Thomas Cook, no guarantees could be made that this additional funding would be forthcoming. In the circumstances, the banking giants were unprepared to throw further finance at the business.
A major re-finance deal had already taken place in 2012, with funding of £1.4bn provided.
Bad News For Investors, Holidaymakers And Related Services
Lots of vivid stories covered some of the experiences holidaymakers had following the collapse of Thomas Cook.
Some travellers were held virtually captive by hoteliers desperate to get hold of payments for their stay, while others struggled to pay for their own flights back to the UK.
Thomas Cook clients due to leave on holidays after the collapse have been told they face up to two months delay in reclaiming the upfront booking charges they have already paid.
From the perspective of Thomas Cook shareholders, it’s sad to say their shares are now worthless. However, some canny hedge funds did manage to profit from the collapse of the business by short selling to the tune of around £5.7mn.