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China's Fosun in talks to rescue Thomas Cook - business live Bank of England's Vlieghe: no-deal Brexit could mean near zero interest rates - business live
(32 minutes later)
The Bank of England might have to cut interest rates to virtually zero if Britain crashes out of the EU without a deal, and it is not clear how long it would take for them to rise again.
That is the verdict of Gertjan Vlieghe, a member of the Bank of England’s nine-strong Monetary Policy Committee.
Speaking at the London office of Thomas Reuters, Vlieghe said:
On balance I think it is more likely that I would move to cut Bank Rate towards the effective lower bound of close to 0% in the event of a no-deal scenario.
It is highly uncertain when I would want to reverse these interest rate cuts.
Interest rates are already ultra low, at 0.75%, but the record low was 0.25% in the aftermath of the Brexit aftermath, when the MPC felt an emergency response was necessary.
The Guardian’s Kalyeena Makortoff reports:The Guardian’s Kalyeena Makortoff reports:
The boss of Thomas Cook has been speaking to journalists and insists a deal with Fosun is the best (and only?) option to keep the company trading.The boss of Thomas Cook has been speaking to journalists and insists a deal with Fosun is the best (and only?) option to keep the company trading.
It is not clear what, if any, impact the reorganisation of the group will have on its 22,000 employees, but Peter Fankhauser said he could offer no guarantees:It is not clear what, if any, impact the reorganisation of the group will have on its 22,000 employees, but Peter Fankhauser said he could offer no guarantees:
That is up to Fosun then to decide... the priority is no to complete the recapitalisation of the business.That is up to Fosun then to decide... the priority is no to complete the recapitalisation of the business.
What happens to jobs? Today’s announcement is really about a plan that ensures the business to continue to trade and operate as normal, and the deal preserves our brand with a sustainable balance sheet, giving us the stability to invest and grow our business.What happens to jobs? Today’s announcement is really about a plan that ensures the business to continue to trade and operate as normal, and the deal preserves our brand with a sustainable balance sheet, giving us the stability to invest and grow our business.
So that is principally really good news for our employees, that is a very sensitive discussions to get to this point, what we have announced today so we did not engage with wider stakeholders like unions, which will happen now.So that is principally really good news for our employees, that is a very sensitive discussions to get to this point, what we have announced today so we did not engage with wider stakeholders like unions, which will happen now.
Here’s our full story on Thomas Cook:Here’s our full story on Thomas Cook:
Thomas Cook in £750m rescue deal talks with biggest shareholderThomas Cook in £750m rescue deal talks with biggest shareholder
To put Thomas Cook’s woes into context, it has a market value of around £200m and net debts of £1.25bn.To put Thomas Cook’s woes into context, it has a market value of around £200m and net debts of £1.25bn.
As Neil Wilson, chief analyst at markets.com, says, “it’s desperate times”. He adds:As Neil Wilson, chief analyst at markets.com, says, “it’s desperate times”. He adds:
Thomas Cook largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm.Thomas Cook largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm.
Shareholders face significant dilution – basically it’s wipe out time. They can take part in the recapitalisation alongside Fosun should they so choose...Shareholders face significant dilution – basically it’s wipe out time. They can take part in the recapitalisation alongside Fosun should they so choose...
News of a deal with Fosun has gone down badly with investors and Thomas Cook shares have hit a record low of 7.5p in early trading, down 44%.News of a deal with Fosun has gone down badly with investors and Thomas Cook shares have hit a record low of 7.5p in early trading, down 44%.
Under the terms of the deal, the shareholding of existing investors will be diluted. The sell off also reflects the cautious tone from Thomas Cook, which highlighted an uncertain consumer backdrop, “particularly in the UK”. It expects earnings in the second half of the year to be behind the same period last year.Under the terms of the deal, the shareholding of existing investors will be diluted. The sell off also reflects the cautious tone from Thomas Cook, which highlighted an uncertain consumer backdrop, “particularly in the UK”. It expects earnings in the second half of the year to be behind the same period last year.
The holiday group also cancelled its third-quarter trading update:The holiday group also cancelled its third-quarter trading update:
All future reporting dates, as previously disclosed, are now under review pending the outcome of the recapitalisation of the Group. As a result, the third quarter trading update originally scheduled for 18 July 2019 is cancelled.All future reporting dates, as previously disclosed, are now under review pending the outcome of the recapitalisation of the Group. As a result, the third quarter trading update originally scheduled for 18 July 2019 is cancelled.
Fosun has issued a statement on its plans to inject capital and take a bigger stake in Thomas Cook:Fosun has issued a statement on its plans to inject capital and take a bigger stake in Thomas Cook:
Fosun is a shareholder in Thomas Cook, because it is a British company operating in the global travel industry, in which we have extensive experience.Fosun is a shareholder in Thomas Cook, because it is a British company operating in the global travel industry, in which we have extensive experience.
We are committed investors, with a proven track record of turning around iconic brands including ClubMed and Wolverhampton Wanderers FC.We are committed investors, with a proven track record of turning around iconic brands including ClubMed and Wolverhampton Wanderers FC.
Thomas Cook boss Peter Fankhauser has been speaking to BBC Radio 4’s Today programme and says a deal with Fosun is the “best available option for us”.Thomas Cook boss Peter Fankhauser has been speaking to BBC Radio 4’s Today programme and says a deal with Fosun is the “best available option for us”.
He added:He added:
It secures the value for our employees, for our suppliers and as well for our customers and that is the main focus that we have.It secures the value for our employees, for our suppliers and as well for our customers and that is the main focus that we have.
This is a very good option to secure the business and to put the business on the solid financial footing for the future.This is a very good option to secure the business and to put the business on the solid financial footing for the future.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Thomas Cook has confirmed this morning that is in talks with its largest shareholder and the owner of Club Med, China’s Fosun, over a rescue deal.Thomas Cook has confirmed this morning that is in talks with its largest shareholder and the owner of Club Med, China’s Fosun, over a rescue deal.
Britain’s oldest package holiday company, which has been struggling with a large debt pile and weaker trading, said it was in “advanced discussions” with Fosun, which -together with Thomas Cook’s core lending banks - inject £750m into the firm, allowing it to keep trading over the winter season.Britain’s oldest package holiday company, which has been struggling with a large debt pile and weaker trading, said it was in “advanced discussions” with Fosun, which -together with Thomas Cook’s core lending banks - inject £750m into the firm, allowing it to keep trading over the winter season.
The deal would give Fosun a large majority of the tour operator business and a large minority stake in its airline, diluting the shareholding of existing investors.The deal would give Fosun a large majority of the tour operator business and a large minority stake in its airline, diluting the shareholding of existing investors.
Chief executive Peter Fankhauser said the deal would secure a future for the business, its customers and its employees:Chief executive Peter Fankhauser said the deal would secure a future for the business, its customers and its employees:
After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the board has decided to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the board has decided to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.
While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees.While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees.
Also coming up:Also coming up:
9.30am BST: Bank of England policymaker Gertjan Vlieghe speaks in London9.30am BST: Bank of England policymaker Gertjan Vlieghe speaks in London
10am BST: Eurozone industrial production figures for May10am BST: Eurozone industrial production figures for May
1.30pm BST: US producer prices inflation data for June1.30pm BST: US producer prices inflation data for June