S&P lowers Thomas Cook view to stable

Standard & Poor’s said it revised the outlook on Thomas Cook Group plc to stable from positive.

The agency also said it affirmed the company’s B long-term corporate credit rating, along with the B rating on Thomas Cook’s £1.02 billion senior unsecured notes.

The recovery rating on these notes is unchanged at 4, indicating 30% to 50% expected default recovery.

The outlook revision hinges on a view that Thomas Cook’s highly leveraged financial risk profile is unlikely to strengthen to levels commensurate with a higher rating over the next 12 months, S&P said.

In fiscal 2014, Thomas Cook posted an adjusted debt-to-EBITDA ratio of about 6.2x and an adjusted EBITDA-to-interest ratio of 1.9x, which are below previous expectations of 4.4x and 2.7x, respectively, owing to higher restructuring costs, the agency said.

Although S&P said it believes Thomas Cook’s credit metrics will continue to improve over the next 12 months, they are not expected to strengthen to a level commensurate with a B+ rating.

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