Thomas Cook Group on the Brink (A) Harvard Case Solution & Analysis

Thomas Cook Group on the Brink (A) Case Solution 

Introduction

Harriett Green was a newly appointed CEO at the Thomas Cook Group. Thomas Cooks Group is more than a century old UK travel services company. The group was facing severe financial issues. During the past three quarters, the company had suffered a huge of loss of about 600 million pounds; also the company had witnessed a major financial loss due to the fall in share value of the company. The investors assessed the performance of the company at its lowest point, as the stock value of the company was at its lowest level for past two years. The company’s bonds issued in the past were also affected badly as the bonds were only traded at 40% of their face value.The new concerns for the company were that due to its downturn in financial conditions, the UK authorities had decided to review the operations of the company in terms of its viability and going concern issues.

Problem Statement

The problem faced by the company in this case is that Thomas Cooks group is facing financial downturn and it has hired a new CEO to who could devise a strategy for the company that will allow the Thomas Cook group to achieve back profitability and retain its position as market leader.The major issues for the CEO were that the liquidity position of the company was worsening day by day and if the capital was not injected in the company, then it might have to face foreclosure.

Issues

The main issues for the Thomas Cook Group had to start increase. This was a shocking news for the company as the company which was ranked as number 1 by Google in the industry was facing severe problems to even continue its business. These issues were that the company had taken loans, which resulted in an increase in debt for the company. The company had signed covenants with the banks for gaining debts capital from banks. Moreover, these covenants required the company to pay their interest and principle payments on time and if the company missed any payments, then the bank could legally declare the company as bankrupt.The bank’s management was primarily concerned about the sums as the company’s financial conditions started worsening just after 32 days of the deals with the bank.When the company released its financial results, which showed that the company had suffered huge losses of more than 500 million GBP, the cash flow position had also became negative and the long term debts that were taken by the company resulted in higher gearing for the company and lower interest coverage ratio for the company....................

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