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Thomas Cook's bonds suffered heavy losses while the costs of insuring against a possible default rose sharply on Thursday, as the agency's ability to pay off its debt was on the rise. more worrying.
Investor anxiety worsened after at least one of the group's lenders sold a loan to the company at a very painful price. A revolving line of credit was sold this week at around 59 pence sterling, according to investors.
Other trading levels observed by the Financial Times also showed that banks were looking to sell this debt to hedge funds at prices ranging from 50 to 60 pence a pound.
A previous Bloomberg report on loan sales sparked a mbadive selloff of the company's bonds on Thursday. Thomas Cook declined to comment on the trading activity.
Revolving credit facilities are held by a company's banks rather than by institutional investors. Such transactions suggest that some of these banks are willing to adopt heavy haircuts when they are exposed to the troubled travel sector, rather than risk greater losses in the future.
The British company's bond maturing in June 2022 has been the biggest selling since it was issued almost two and a half years ago. Its price fell from 12.5 cents to 76.7 cents on the euro, bringing the yield to a record high of 23%. The paper was traded with a 16% yield on Tuesday, according to Bloomberg data.
Meanwhile, the cost to insure against a default the use of credit default swaps of a five-year term has increased by 34 percentage points, which means that it now costs $ 34 million to secure $ 100 million of debt, in addition to $ 5 million of outstanding premiums. The company's CDS curve is now reversed, a sign of extreme financial distress, with traders rushing to buy short-term credit protection for fear of short-term default.
London-listed Thomas Cook shares were also hard hit: they plunged 15% on the worst day since early February.
By the end of 2018, the group had warned twice about its profits in the face of stiff competition and the effects of bankruptcies in airlines and hotels. In February, it launched a strategic review of its airline division as it announced a worsening of losses.
However, badysts Citigroup and S & P Global Thursday both questioned the ability of the 200-year-old company to sell the airline division.
James Ainley, an badyst at Citigroup, said the company may be struggling to sell the unit at an attractive price. S & P Global added: "The proposed sale could help improve the group's liquidity and financing situation; However, the run-up risk related to this accelerated sales process is high, given the overcapacity of the airline industry and the fact that the valuation and timing of such a transaction are very uncertain. "
The rating agency lowered the company's long-term rating of "B-" by one notch to the company's rating, pushing it deeper into the junk domain and keeping it at its most. low level since 2013.
He attributed this deterioration to the weakness of booking trends in the European tour operators market, particularly in the United Kingdom. The group added that this could exacerbate the pressure on Thomas Cook's "earnings, cash flow and already low liquidity, leading to a further increase in financial indebtedness".
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