Top City lawyers advising Thomas Cook on its failed rescue plan are said to have demanded weekly payments from the travel company to ensure they received their fees in the run-up to its collapse into insolvency.
The move spared insolvency experts at elite “Magic Circle” law firm Slaughter and May and US firm Latham & Watkins from joining a long queue of creditors when the company went down – including the company’s 21,000 staff, who face a long wait for their final pay cheque.
Also fairly normal I would have thought for both beancounters and shysters to ask the same of a company they’re trying to save from bankruptcy….
Even the government’s Official Receiver charges fees in bankruptcy. To file your own bankruptcy petition costs £680.
However an administrator is able to recover monies paid out as a result of fraudulent or unfair preference….
Yes sounds like the sensible thing to do. Otherwise they wait a year or two and get pennies in the pound…
Diogenes, yes. If it was clear the firm was going to fail then presumably it was unlawfully trading.
But if it was not obvious, then … common sense, and no less than anyone else with their head screwed on would do.
And, in the same context as the comments above, a rather large clue is “rescue plan”.
Thomas Cook’s bondholders will be almost completely wiped out
Why did anyone think there was a bright commercial future for high street travel agents? Are they also worried about their investments in video rental shops and the telegram service?
Asking for payment in advance from clients with liquidity difficulties is entirely standard behaviour. We do it. We’re not in the business of offering our services against what are de facto open-ended interest-free loans which we have no guarantee to ever be able to recover.
“Why did anyone think there was a bright commercial future for high street travel agents? Are they also worried about their investments in video rental shops and the telegram service?”
There’s often a thing with declining companies that they’re still making a profit, and the gamble is how long they hold on for. Like WHSmith invest almost nothing in the business. They know it’s dying, and for now, they’re just trying to grab as much profit as they can until it croaks.
WHSmith is returning to its origins as a railway station outlet – captive customer base with nowhere else to go. The station/airport/etc outlets are always packed when I’ve been there, The magazines I used to get by passing a store I now get on subscription through the post.
BoM4 – Reminds me of the local newspaper industry. I’m slightly amazed Johnston Press lasted till 2018.
Think I’ll nip out for a Wimpy’s and then have a browse at Our Price.
Steve:
Didn’t they try to convert to selling package tours (flight/lodging/excursions, with them running the flights) from the more traditional travel agent stuff? With a traditional travel agent I’d think you wouldn’t be stranded if they went bust during your trip, as they’re not operating the flights.
Ted – something like that (I’m hazy on the details, as I don’t like flying to Foreign anyway). Obviously vertical integration or whatever you’d call it didn’t help them tho. Seems they expanded from one doomed line of business to several unprofitable ones.
Actually, as abacab correctly points out, it’s more than that – *everyone* does this (as a general principle).
In that – the first thing any half competent Sales Ledger outfit should do before advancing (any worthwhile amount of) credit is ensure that the customer is in fact creditworthy.. And if a customer isn’t, cash on delivery (depending on the circumstances).
Yes, yes, I know Tim’s point here is different re those specifically working in the field with inherently high risk clients.
jgh,
The travel shops are far more profitable than the other shops.
@PF – I’ve seen clients who pay super-fast when invoiced in advance, and who take months and months if invoiced in arrears and always have excuses.
Part of working with a new client is working out what their “Zahlungsmoral” is and adapting our invoicing policy to that. We’d rather invoice in arrears, to be honest – it’s simpler (cos we’re hourly billing so often need to correct afterwards), easier, and shows trust. But it requires trust on both sides.
Once a client’s established that they pay in a timely fashion, we can move from payment in advance to invoicing in arrears.
A new client known to be in difficulties would be 100% in advance and that wouldn’t change until they were no longer having problems.
We’re not a bank, nor are we venture capitalists.