The travel company Thomas Cook went into liquidation last week leaving thousands of people stranded. Some say the U.K. government could have prevented the company's failure.
that failed, and read the CEO's statement in its insolvency petition. I am in no doubt that the cost to British taxpayers of rescuing Thomas Cook would have been far more than £200m . And perhaps even more importantly, it would have amounted to giving state aid to a foreign investor. It would have been madness.
The Chinese tour company Fosun had agreed to contribute half of the new money originally agreed, in return for a controlling stake in the company. But when the banks asked it to contribute the additional money, it balked. At that point, fearful that Fosun would pull out completely, Thomas Cook's management approached the U.K. government for help. The CEO’s statement to the insolvency court says that it made three requests of the U.K.
c) if HMG was unwilling to accept the proposal outlined in above, given the risk that the directors of the Company would be compelled by events to conclude that the Company no longer had a reasonable prospect of avoiding insolvency without the Recapitalisation Plan being substantially agreed with all key parties by 22 September 2019, that HMG considered what support it might be able to provide as an alternative to the proposal outlined above to enable the directors of the Company to determine...
But is the government really responsible for Thomas Cook’s failure – or is someone else to blame? Well, in my book, the government acted as it should have done. The CEO’s statement to the court reveals the true extent of Thomas Cook’s insolvency. By the time it failed, it had a balance sheet hole of over £3.1bn and cash reserves of less than £1bn , far less than its forthcoming obligations. The CEO estimated that it would run out of cash by October 4 or even sooner.
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