My mistake you are quite right, they don’t have any. I am definitely loosing the plot !
1 Like
Condor has 42 aircraft in its fleet. It is a subsidiary of TC. The German Gov has provided it with a loan and it is still operating.
TC had debts of £1.7 bn.
Would the U.K. gov have effectively bought ALL this debt if it had provided the requested £250m.
What happens to this debt now ? Who pays ? Who looses ?
I suspect a lot of this will hit the leasing cmpys. As I posted before, 116 on the fleet list but only 34 active. maybe they can claw them back, but that means reselling or leasing them on to relieve what they are owed. Hows the pe-loved airplane market these days, I suspect you’ve a better idea than most.
The UK Gov wouldn’t necessarily have bought the debt. It could have chosen to merely provide bridging finance. But in a few months time the problem would probably have arisen again and in that case the Gov would have just been another creditor. In any case it was the right decision not to fund them I think.
As TC are in liquidation, the sale of assets etc will offset the debts a little but creditors are likely to get only a few pence in the £ if anything and the shareholders will probably get nothing at all.
Best
David
2 Likes
I bought my daughters Axia silver annual travel insurance this year. They were surprised to get an email from Axia offering assistance if they were caught up in the TC failure. Nice to see an insurance company being proactive, they normally duck an issue like this.
The debt is pretty much all in tradeable bonds, which are trading less then 10p in the pound (or C in the EUR as all their bonds are EUR denominated), the most liquid is trading at 5c. Once the assets of the company are sold the bank debt (loans) will get paid first, then the bond holders, then equity. Recovery value here is minimal, equity will be zero and the price of the bonds is fully reflective of what you can expect to receive. There were/are a lot of Hedge Funds involved in the bonds when they got truely distressed so you can expect some court cases rumbling on.
Who looses ? The bond holders, which is likely to be in a lot of peoples pensions … Clearly very diluted by all the other holdings, but none the less bond holders take the hit.
In a situation like this, should the chief executive and other board members be forced to repay bonuses they have received over the preceding, say, 5 years, on the basis that they clearly wer not justified?
Depending on how the contracts were set up, there may be “malus” clauses or clawback clauses in there. Those allow the company to get renumeration, typically stock and bonuses, back if the performance turns out to have been mis-stated. Probably won’t apply here though as I don’t think it was mis-stated, just not good.
Perhaps, if the bonuses were based on structured levels of performance and ‘creative’ I.e. dubious methods of calculation had been employed to demonstrate those levels of performance.
Otherwise if they did the job they were employed to do and the reward for doing so was written into their contract, then I would guess unlikely.
It would be a major dis-incentive to good managers if they were to join companies in trouble and then find themselves liable if they couldn’t turn the company round.
1 Like
Getting a huge bonus for failing is surely more of a disincentive to do their job properly! Payment by results should work both ways - a bonus should be a reward for excellence not an automatic right even given piss poor performance.
There needs to be some sense of proportion to remuneration. I propose the unit of the “nurse”. Say a nurse on average earns £35k then I would argue nobody is worth more than 10 nurses. To say the incompetent pillocks who drove Thomas Cook into the ground are each worth more than 100 nurses is frankly obscene!
I am a big believer in top brass getting paid a notional salary and bonus should be be shares, if they run the company into the ground they get nothing, if they succeed they share the wealth. A big monetary bonus can be counterproductive I think, sometimes makes management lazy.
To answer @Don 's original question re should HMG have supported TC, my view is absolutely not - even if by not doing so the bill for HMG/ATOL exceeds the amount in question. TC is analogous to Carillion - e.g. complex financial structures involving many stakeholders and the writing has been on the wall for a very long time.
HMG should only intervene where the subject corporate has strategic importance for UK plc and the wider economy.
I’ve seen it too many times where boards/management teams don’t see the obvious staring them in the face and, I suspect, we are going to see an HMG-lead investigation in to the circumstances here, noting (AIUI) shareholders were paid a dividend in Nov-18. There are various ‘checks and balances’ in the quoted-corporate arena which are supposed to prevent ‘immediate failures’ as in this case and as was seen with Carillion. It’s clear that in many cases these aren’t working effectively e.g. equity holders are still being rewarded until very late on.
Though I don’t believe the government should have stepped in to save Thomas Cook I have to say that we travelled with them to Goa each year for seven years and never had a single problem with the flights. Though once we booked a flight and hotel package with them because it worked out incredibly cheap but after two nights of ‘I’m Portsmouth till I die’ by a group of permenantly drunk Pompey supporters we moved to a beautiful beach side bungalow at our own cost and never set foot in a package hotel again.
This topic was automatically closed 60 days after the last reply. New replies are no longer allowed.