Hundreds of smaller travel agents are braced for the fallout from a failure of Thomas Cook Group (TCG), with industry experts warning of a “domino effect” sweeping across the sector. As the 178-year-old tour operator collapsed early on Monday, travel industry leaders attacked the Government’s “shambolic” introduction of new European Union rules last year which they said they could push other travel agents into the red. The changes in UK law because of the European Package Travel Directive mean most hotel and flight trips booked through a travel agent are now deemed packaged holidays, whether or not they are provided by separate companies. With the collapse of Thomas Cook, independent travel agents that have combined its flights with third-party hotels will be responsible for either replacing the flight or refunding customers the cost of the whole trip – an expense that could decimate the finances of smaller agents.
A late-cycle surge in ‘leveraged loans’ has echoes of financial engineering before the Lehman crisis and could lead to a cascade of fire sales if conditions suddenly tighten, the world’s top financial watchdog has warned. The Bank for International Settlements said the high-risk loans have climbed to $1.4 trillion and are increasingly being sliced and diced much like subprime mortgage debt before 2007. They are packaged into debt securities known as collateralised loan obligations (CLOs) and mostly sold to unknown funds. Leveraged loans are a form of bank lending to heavily indebted companies with junk credit ratings. The number involving firms with debt above five times Ebitda earnings has soared to 60%, almost a third are over six times earnings. These companies are vulnerable to the slightest interest rate shock. The proportion issued without covenant protection has rocketed from 20% to nearer 80% since 2012 as investors take on ever greater risk to eke out extra yield, implying that the loss ratio could extremely high if there is a wave of defaults.
BT Group (BT.A) is getting kitted up to defend its Champions League crown, amid mounting confidence that its sports broadcasting arm is delivering returns following price rises. European football’s governing body Uefa has signalled to potential bidders that it will put television rights on the block around the middle of next month. BT, which ambushed Sky at the peak of their rivalry in 2013 by buying exclusive rights to all Uefa club competitions, will be favourite to retain the deal. Under chief executive Philip Jansen and consumer boss Marc Allera, the telecoms operator has in recent months reviewed its television strategy and implemented price rises. It is understood that the most recent hikes, of as much as £48 per year, to BT Sports subscriptions this summer have had little impact on cancellations while improving returns from a business that remains controversial among investors. Some continue to question whether the billions of pounds BT has invested in sport could have been better spent elsewhere.
Marks & Spencer Group (MKS) has lost its finance chief after just 14 months in the job, raising new questions over its cost-cutting efforts and plans to break into the competitive online grocery market. Humphrey Singer “has decided to leave the business” the company said yesterday. He will remain with the retailer while it finds a replacement. His exit will add to investor concern around M&S following its relegation from the FTSE 100 index this month. In July clothing chief Jill McDonald stepped down after two years, after being blamed for mistakes including a promotion to sell more jeans that left the company without enough stock. Chief executive Steve Rowe said Mr Singer had “helped to establish the foundations of our transformation with a stronger balance sheet” and overseen “a much keener focus on reducing our cost base”.
The Hong Kong stock exchange has called on a duo of banking heavyweights to help it charm London Stock Exchange Group (LSE) shareholders, after its shock £32bn takeover approach was comprehensively rejected by the board. The Telegraph understands that HSBC Holdings (HSBA) has been hired by Hong Kong Exchanges and Clearing (HKEX) to advise it on the process after the banking giant helped it organise meetings with City investors last week. The bank is likely to announce the move tomorrow. Swiss bank UBS has also been drafted in to add credibility to the HKEX bid. HSBC and UBS are focusing on wooing investors based in London and Asia. HKEX has a long-standing relationship with HSBC. Its chairman Laura Cha, appointed with approval from the Hong Kong government, also sits on the banking giant’s board as a non-executive director. HSBC has agreed to organise meetings with City investors in the hope that it will land an official role on the deal, multiple sources said.
Eve Sleep PLC (EVE) said merger talks with a rival had collapsed as it sounded the alarm on losses. Eve said that selling its foam mattresses in a box had “been more challenging than previously anticipated” and now expected revenues to be between £25m to £28m this year. As a result, it has become harder to narrow its losses. However, the company insisted it could go it alone after deciding “now is not the right time to pursue the potential merger and that it is more appropriate to focus on the Eve rebuild plan”. Chief executive James Sturrock, who replaced co-founder Jas Bagniewski last year, added: “We have taken action to reduce our cost base, including a significant reduction in administrative expenses compared to 2018. We anticipate a significant reduction in losses.”
Questor: the shares are not meal-deal cheap but stay at the table for Compass Group (CPG) predictability. Questor share tip: the catering giant has already made a 22% gain for readers but they should wait for the next course. Hold
