It has been claimed Thomas Cook forked out over £20 million to City accountants and advisers in its final days. The company was forced to pay fees worth tens of millions of pounds to more than 30 advisers as it struggled to secure a rescue deal, with the vast payouts adding to an already severe cash burn at the collapsed travel group. The firm collapsed last month after failing to get an additional £200 million, leading to the biggest repatriation of UK nationals during peacetime. Some 9,000 staff in the UK also lost their jobs. The doomed firm sought to put together a £900 million rescue deal by splitting its business between its largest shareholder and its lenders and bondholders.
Dozens of City advisers - working on behalf of the company, bondholders, shareholders, industry insurance schemes such as Atol and the pension fund - were involved in talks to restructure the debt-laden business in the run-up to its demise. About 20 law firms, the Big Four accounting groups, and leading restructuring advisers were also brought in. Even the Civil Aviation Authority (CAA) hired professional help - turnround specialist Alvarez & Marsal - as it prepared for the biggest repatriation of UK nationals in peacetime. The company paid out fees to advisers during its restructuring negotiations despite most working on behalf of other parties involved in the talks, said a person close to the negotiations. The bill would have been much higher if these groups had been paid in full for their work in September.
John McDonnell, the shadow chancellor, said: “The workers and customers of Thomas Cook will look on aghast at the feeding feast that has taken place at this company by accountants and advisers whilst they have lost their wages, jobs and holidays. We need a complete overhaul of the system for dealing with companies in trouble.”
Late in the negotiations, new investors struggled to find a law firm to represent them that was not already in the room or had not worked on the restructuring, said one person close to the talks. Peter Fankhauser, Thomas Cook’s chief executive, said the company would have “run out of cash by 4 October 2019 and probably earlier”, according to insolvency documents from late September. Thomas Cook’s mounting adviser bills reflected so-called “cost cover” agreements to bring all parties needed to save the group around the table as it struggled to thrash out terms of a deal. Such agreements are not unusual, but the extent of the list shows the multiple competing interests involved. Some of the groups worked on the plans to both save the company as well as on the insolvency once the company had failed.
AlixPartners, for example, was brought in by Thomas Cook to advise on its restructuring options in February but was then retained as the special manager to the insolvency service as the government sold the more valuable parts of the company. It will also oversee the return of more than £300m to holidaymakers that had booked Thomas Cook holidays. Thomas Cook, the CAA, AlixPartners, Alvarez & Marsal, the Big Four accountants and the law firms declined to comment.
Rachel Reeves, Labour MP who chairs the business select committee, said: “The collapse of Thomas Cook has again raised serious questions about the role of auditors, consultants and advisers and highlighted concerns that too often their interests appear at odds with their client’s shareholders, customers or employees.”