Skip to main content

Don't Just Book It, Thomas Cook It!


Thomas Cook has been around for 170 years, but it is going through a very uncertain time as it attempts to renegotiate its debt with its bankers.  Its share price fell 75% in trading yesterday.

My Corporate Finance class will soon learn that some of the major costs associated with debt are the costs of financial distress.  The publicity surrounding its debt difficulties will not be good for Thomas Cook.  Its managers will have their attention diverted from managing the business to dealing with creditors.  Its best employees may try and jump ship (excuse the pun!).  It will be unable to finance new profitable holiday packages.  But most of all, who will want to book their honeymoon or summer holiday with a company that may not be around in a few months?   
  


Popular posts from this blog

The Failure of Herstatt Bank

As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 

The Great Depression

Marginal Revolution University has a great video on the Great Depression.