Hundreds of thousands of people have been awaiting the decision regarding the Thomas Cook rescue deal. Those same people were likely disappointed after reading this morning’s news that the proposed rescue deal failed and Thomas Cook has subsequently collapsed, leaving around 600,000 people stranded abroad with approximately 16,000 people due to return to the UK today alone.
What went wrong?
Thomas Cook was one of the biggest British-based global travel agencies. After more than 150 years in operation, it was suggested in November 2018 that Thomas Cook should consider splitting its business to recover its financial health after experiencing a decline in its performance. It was noted that the company had also received bids for its airline business and for the company as a whole.
In an attempt to recover financial liquidity and due to the increase of online bookings, Thomas Cook closed 21 travel offices and approved the redundancy of approximately 300 members of staff in March 2019.
In May 2019, Thomas Cook announced its numbers for the first half of the financial year, including a loss of £1.5 billion, £1.1 billion of which was attributable to goodwill write-downs. Thomas Cook began negotiations regarding a potential sale of its tour operator business and the proposed deal was that Fosun International, would acquire 75% of the company’s tour business and 25% of its airline for a proposed price of £900 million.
The late mid-September negotiations were aimed at obtaining an extra £200 million, as requested by the company’s lenders, to cover the gap in its finances and prevent Thomas Cook from falling into administration.
It is noted that Thomas Cook attempted to obtain the £200 million gap-bridging finance, both from the Government and/or Fosun International. However, the Thomas Cook was unsuccessful, the deal was therefore not approved and Thomas Cook collapsed by falling into compulsory liquidation.
Other comments made by Thomas Cook’s representatives regarding its collapse included the impact that Brexit had on the business, as well as the 21st century ‘internet era’ where individuals can book any holiday they wish online including, hotel accommodation, flights, transportation etc, thus reducing profits and engagement in the travel industry.
What is compulsory liquidation?
Compulsory liquidation (also known as winding-up) is a court-based procedure through which a company is formally dissolved and its assets are realised (i.e. sold) and distributed to the company’s creditors. The most common reason for a winding-up order is insolvency of the company.
If such a court order is obtained, the appointed liquidator will being to realise the company’s assets and distribute funds to the company’s creditors.
Aftermath and next steps?
Thomas Cook ceased trading with immediate effect of this morning, on the 23rd of September 2019, therefore leaving approximately 22,000 jobs at risk worldwide, with 9,000 in the UK alone.
The collapse of the travel agent also left approximately 150,000 Britons stranded abroad with 16,000 due to return to the UK today. The Government have begun peacetime repatriation aimed at bringing the holiday makers home ‘as close as possible’ to their due return date.
In short, the disastrous collapse of Thomas Cook has had a huge impact, not only on holiday-makers stranded abroad and those with booked holidays, but also on the British travel markets and the employment sector. Only time will tell the full scale of the impact of collapse, but it would appear that its effect will be widespread and significant.
The Corporate Commercial Department here at Fisher Jones Greenwood LLP can guide you through the steps of a compulsory liquidation and assist you with any other insolvency practices to rescue the company prior compulsory liquidation; as well as assist you with the preparation of any documentation required.
Should you require any information or assistance do not hesitate to get in touch. Please call 01206 700113 or email [email protected].
Source: BBC News