Bank control of Thomas Cook on the cards

10th Jun 2009

Thomas Cook could fall into the hands of Royal Bank of Scotland and seven other banks following its parent company, Arcandor, filing for insolvency.

The court filing covers the German retail giant’s Karstadt department stores, Primondo mail-order and Quelle catalogue businesses but excludes Thomas Cook, Europe’s second largest travel company.
Analysts expect that Arcandor will retain the 52.8 percent stake in Thomas Cook until administrators make a decision about its ownership.

The shares were fronted by Arcandor as security against loans with a group of eight banks, including Royal Bank of Scotland, Commerzbank and Bayern LB.

German banking sources said the new owners “would not consider a fire sale of the shares in the best interest of Thomas Cook”.

Thomas Cook insisted that Arcandor’s insolvency would have no effect on its day-to-day operations and no impact on customers, as its financing arrangements are “completely independent”. However it says it will “closely monitor” what happens to Arcandor’s shareholding.


Manny Fontenla-Novoa, chief executive of Thomas Cook, said that the only potential problem for the group could be the effect on its share price.

“In terms of the impact on our share price, this has been rumbling on since September last year and therefore is not a surprise to anybody,” he said.

Arcandor filed for bankruptcy after being unable to secure up to €710m (£611m) in state aid, which it needed by the end of this week for its 120 stores to continue operating.

German Chancellor Angela Merkel rejected its desperate plea for a €650m bail-out, accusing its shareholders and backers of not presenting a sustainable plan that would protect taxpayers’ money.

Analysts suggest that the most likely scenario is an orderly placing of the shares with institutional investors. However with a 52.8 percent stake up for grabs, a takeover remains a possibility, with Rewe, Germany’s third-biggest tour operator, tipped to make a bid. Rewe said early that it would consider buying the stake if it was put up for sale.

Karl-Gerhard Eick, the Arcandor chief executive, admitted that he had considered selling the stake to Rewe in order to slash the group’s debt mountain.
In an interview last month he said: “Under normal circumstances proceeds of €1.3 billion to €1.4 billion would have been possible. But right now, such a price is impossible to get. If I sell now, I wouldn’t even be able to pay back the loans.”
Another possibility is Manny Fontenla-Novoa, the Thomas Cook chief executive, seeking backing for a management buyout.



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