As the British economy moves closer to recession and job losses mount higher in both retail and manufacture, it is comforting to know that, for some people at any rate, the storm clouds have a silver lining.
As eleventh-hour efforts were being made to rescue stricken tour operator Thomas Cook, stock market speculators were praying that the rescue would prove abortive (as it did), obliging the company to go into liquidation.
Whilst 21,000 Thomas Cook employees were wondering what would happen to their jobs, and thousands of stranded passengers were wondering if they would ever see home again, the primary concern of the speculators was to make sure that the company sank without trace.
According to Bloomberg, these leeches, which include Sona Asset Management and XAIA GmbH, “stand to earn as much as $250m from the bankruptcy”, because they “invested in derivatives that pay out when a company defaults.
“The fate of those securities was at the heart of the battle over whether Thomas Cook lived or died. Thomas Cook will be the latest of several big pay-outs this year for hedge funds and traders who bought the credit-default swaps (CDS).
“The list includes UK fashion retailer New Look … More are set to follow as Europe’s economy slows and a growing number of companies come under stress.” (Hedge funds in line for $259m of Thomas Cook CDS payout by Katie Linsell, 23 September 2019)
The biggest worry assailing these ambulance-chasers was that some last-minute reprieve might save the condemned company from bankruptcy. In such a case the leeches either have to wave goodbye to their gambling winnings or (perish the thought) actively conspire to push the victim into bankruptcy.
Bloomberg explains: “Thomas Cook’s rescue could have rendered credit-default swaps on the debt worthless, and investors including Sona had threatened to block it. Holders of CDS were concerned about a technicality related to plans to convert Thomas Cook debt into shares, leaving the CDS with nothing to insure.”
Happily for this little band of sociopaths, the rescue failed. Bloomberg quotes one Mark Pierron, a finance wonk at Spread Research in Lyon, as saying: “It’s certainly a relief for the hedge funds that Thomas Cook has filed and they haven’t had to push the company into administration.”
This is not much of a relief for the thousands of Thomas Cook employees facing an uncertain Christmas, however.