S&P downgrades Thomas Cook

S&P said it lowered the long-term issuer credit and issue-level ratings on Thomas Cook Group plc to B- from B and placed all of the ratings on CreditWatch with negative implications.

The CreditWatch placement reflects the possibility of a further downgrade if Thomas Cook is unable to bolster its liquidity, which it think requires it to secure external sources of funding and long-term covenant relief, S&P said.

Tour operators in Europe, and particularly in the United Kingdom, face softer trading conditions than previously expected, the agency explained.

This is expected to weaken Thomas Cook's cash flow generation and lead to mounting liquidity pressures, S&P said.

The agency said it expects this will exacerbate the pressure on Thomas Cook's earnings, cash flows and its already weak liquidity position, leading to further increases in financial leverage.

S&P also said it remains doubtful about the company's ability to comply with the maintenance covenants attached to its revolving credit facility.

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