Investment in Thomas Cook Group plc
June 26, 2013
Proventus Capital Partners invested into Thomas Cook Group plc (“Thomas Cook”) during its financial and strategic transformation.
Thomas Cook is one of the world’s largest leisure travel groups with more than 23 million customers, in 19 countries with charter tour operations as core business under a number of strong trademarks. The Nordic business operates under the Ving trademark which has a unrivalled business model and strong market position. Other core markets are UK, Germany, France, Belgium, and the Netherlands.
Thomas Cook ended up in an over levered situation after a number of debt financed acquisitions and dividends between 2007 and 2010, which reduced its ability to cope with external events regularly affecting airlines and tour operators. The ash cloud in 2010 and the Arab Spring in 2011 had severe implications on volumes for leisure travel and caused Thomas Cook’s liquidity squeeze in late 2011. As the liquidity problems became publicly known, market values of Thomas Cook’s equity, bonds and loans fell to distressed levels.
Management, led by interim CEO Sam Weihagen acted resolutely and responsibly by implementing thorough cash flow planning, asset disposals and other measures to de-risk the business model in the first six months of 2012. A new top management led by Harriet Green joined the company in the second half of 2012 and quickly initiated a bottom-up strategic review that was presented in March 2013 and highlighted the ability of improving profitability and cash flow generation markedly, hence enabling a revaluation of Thomas Cook.
Based on Proventus Capital Partners previous experience from the travel industry, we early on concluded that Thomas Cook’s situation was severe and complex but that the company had strong inherent values. After analyzing the situation closely, Proventus Capital Partners invested into the company’s bank loans, and actively took part in the discussion on a refinancing. Management used the market window in May 2013 to raise new equity and refinance debt to ease Thomas Cook’s debt burden and liquidity situation.