Apr 12, 2019

Thomas Cook warns of risk it breached its own borrowing limits

Thomas Cook has told shareholders that it may have regularly been in breach of its own borrowing limits, a new headwind for the travel company which is restructuring in the face of shifting consumer habits. The group said on Friday that the board has received external advice that its current interpretation of its borrowing limits may have led the company to "Inadvertently" exceed the borrowing rules in its articles of association. The company had been using its year-end audited numbers to calculate its borrowing limits, but this would present different results to using a more up to date picture of its capital cycle when calculating its borrowing. The borrowing limit, a ratio of net assets to net debt, has been in Thomas Cook's articles since 2007, but the issue has not previously been raised publicly by regular auditors EY. EY did not immediately respond to a request for comment. Thomas Cook has asked shareholders to allow it to remove the borrowing limitations in its articles for a limited period at a general meeting on April 29th. The board will then reconsider the limitations on its borrowings before its next AGM. The company said that despite the breach of its own articles, the borrowing has always been "Consistent with the credit rating and financial needs of the business."

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