The hedge fund operators purchased credit default swaps and these investments would have been worthless if CEO of Thomas Cook, Peter Fankhauser, had managed to clinch a deal at the weekend. But as a result of the collapse CDS payouts are now expected to reach $250m (£201m), according to reports by Bloomberg. Nearly 11 percent of the travel company’s shares were shorted ahead of its collapse.
Two hedge funds, London-based TT International and Whitebox Advisers, from Minneapolis – made up the bulk of the shorts, together holding around 7 percent, according to ShortTracker data.
Hedge fund short sellers have cashed in on the rapid decline of Thomas Cook’s share price, which plunged 85 percent in the six months before Sunday’s collapse.
They borrow shares in a company, for a fee, and then sell them in the hope of buying them back at a lower price, and pocket the profit.
Other hedge funds are also set for a windfall from investments in credit default swaps, which are form of insurance that pays out when a company defaults on its debts.
Thomas Cook (Image: GETTY)
Thomas Cook (Image: GETTY)
As the 178-year-old travel agent neared collapse in the early hours of this morning, data showed that its shares were the most bet-against in the UK.
Thomas Cook’s share price crashed 89 per cent over the last six months.
Last-minute talks to try and rescue the ailing firm fell apart last night, after the Government declined a request to put £250million into Thomas Cook to help it survive, following lenders’ demands for more funds to secure a rescue deal.
The holiday group has been placed into compulsory liquidation, rather than administration, meaning the business will be wound down, with AlixPartners and KPMG appointed to oversee this.
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Thomas Cook (Image: GETTY)
Shares were suspended as the stock market opened this morning.
The UK’s biggest peacetime repatriation effort has now started to bring back about 160,000 British holidaymakers stranded abroad by Thomas Cook and its airline’s collapse.
While thousands of holidaymakers were waiting in overseas airports for the government’s emergency airlift to get them home and Thomas Cook staff were losing their jobs, former bosses of the stricken travel firm came under fire for receiving payouts worth more than £35m in the last 12 years.
Manny Fontenla-Novoa, who led the acquisition spree that saddled the company with more than £1bn of debt, was handed more than £17m in just over four years as boss of Thomas Cook, boosted by bonuses awarded for slashing 2,800 jobs following the merger with MyTravel.
Thomas Cook (Image: GETTY)
He quit in 2011 as the tour operator came close to collapse.
His successor was Harriet Green, who was paid £4.7m for less than three years plus a share bonus worth a further £5.6m.
She handed a third of that award to charities after the deaths of two children from carbon monoxide poisoning in Thomas Cook accommodation in Corfu.
Green also claimed £80,000-a-year to cover her hotel bills at the five-star Brown’s hotel in London, where she lived during the week.
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Peter Fankhauser, who was in charge when the company collapsed, was handed £8.3m, including £4.3m in bonuses.
Labour’s shadow chancellor John McDonnell called on Thomas Cook bosses to “examine their consciences”, while the party’s shadow minister of consumer affairs, Gill Furniss, called on the bosses to hand back their bonuses.
Thomas Cook & Son was founded by Thomas Cook, a cabinet-maker, in 1841 under the name “Thomas Cook” to carry temperance supporters by railway between the cities of Leicester, Nottingham, Derby and Birmingham.
In 1851, the founder arranged transport to the Great Exhibition of 1851.
Thomas Cook profits fact file (Image: Express)
He organised his first tours to Europe in 1855 and to the United States in 1866.
In 1865, the founder’s son John Mason Cook began working for the company full-time.
In 1871, he became a partner, and the name of the company was changed to Thomas Cook & Son.