(Bloomberg) -- Thomas Cook’s bonds fell to record lows on Monday following a report from Sky News that a payment intermediary is now working with the travel agent, seeking to extend the period for which it retains holidaymakers’ payments for trips.
The company’s actively traded notes maturing in 2022 tumbled 14 cents to 33.36 cents, based on data compiled by Bloomberg. They have lost more than 50% of their value this year as the junk-rated company faces mounting losses and an increasing debt pile.
A payment company working with Thomas Cook in the Nordic region is in talks to extend to several weeks instead of two days, the period for which it retains payments for trips, Sky News reported without saying how it got the information.
“There’s definitely a prevalence of fear in the market. The Sky News story shouldn’t really be a huge surprise...similar to retailers like Debenhams when suppliers were refused credit insurance, it’s a natural reaction,” said Neill Keaney, an analyst at CreditSights. “However, the headlines are undoubtedly going to stress bookings.”
Read more: Thomas Cook Should Swap Its Debt for Equity, Citigroup Says
Debt Swap
The report added to concern over the travel agent’s financial health after it posted a 1.1 billion-pound ($1.4 billion) writedown at a U.K. arm last week and it warned of another tough summer ahead.
Thomas Cook should undertake a “substantial debt for equity swap” to improve its balance sheet, Citigroup analyst James Ainley wrote in a note to clients on Monday. Converting 1 billion pounds in outstanding bonds would allow the company to save interest payments and remain in business in the long run, while it also likely would mean there would be “little or no value for the existing equity holders,” he said.
(Adds analyst comments on fourth paragraph.)
To contact the reporter on this story: Tasos Vossos in London at tvossos@bloomberg.net
To contact the editors responsible for this story: Hannah Benjamin at hbenjamin1@bloomberg.net, Vivianne Rodrigues
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