- Travelex announced debt restructuring as the company collapsed into administration due to the dual impact of coronavirus pandemic and the cyberattack that it faced in December 2019.
- A special purpose vehicle (SPV) consisting of some creditors have acquired the company’s UK business apart from its operations in Brazil, Middle East, Turkey, Nigeria, and Asia Pacific.
- Travelex will cut around 1,309 jobs. The pre-pack administration has saved 1,802 jobs in the UK and 3,635 globally
- Travelers remain cautious of overseas trips despite the governments lifting travel restrictions
The coronavirus pandemic has brought a deep impact to the financial markets and many experts believe that foreign exchange trading would continue to do so for a long period of time. Losses reported by businesses, rise in unemployment, and travel restrictions due to the global pandemic have severely impacted the foreign currency businesses. In a recent announcement, Travelex, a leading foreign exchange company, announced falling into administration after sticking a rescue deal. The company will let go around 1300 jobs.
Travelex goes into administration, company to cut 1309 jobs
The foreign exchange company, Travelex announced debt restructuring as the company collapsed into administration due to the dual impact of coronavirus pandemic and the cyber attack that the company faced in December 2019. It has appointed PricewaterhouseCoopers (PwC), the advisory firm to help carry out the company’s restructuring deal and pre-pack administration. The administration aims towards allowing the buyers to opt for the company’s assets that they consider best and leave others.
A special purpose vehicle (SPV) consisting of some creditors have acquired the company’s UK business apart from its operations in Brazil, Middle East, Turkey, Nigeria, and Asia Pacific. The UK business of Travelex is involved in servicing clients that include corporate houses and supermarkets, besides the ATMs located outside the UK airports. Given that majority of the UK retail business is no longer trading, Travelex has not sold many of its businesses at other locations as well as few of its operations at the airport sites. Travel restrictions due to the global pandemic have severely impacted the foreign currency business.
PwC highlighted that the business at Travelex has come under pressure amid the continued fight against the Covid-19 pandemic and the impact of the cyber attack on the company December 2019. PwC also informed that the pre-pack administration has saved many jobs at Travelex including around 1,802 jobs in the UK and 3,635 globally. Safeguarding these jobs will help the company to continue with its operations. However, as majority of the UK retail business is not in a position to continue trading, Travelex will cut around 1,309 jobs.
The deal has reduced the company’s debts from £385 million to £160 million. It would also provide £84 million as new cash into the business to build on its current market position and brand. As part of the deal, turnaround specialist, Donald Muir will replace Tony D’Souza, the present chief executive of Travelex.
Travelex faced an attack by ransomware hackers, interfering with the online travel money related services for several clients such as Royal Bank of Scotland, Barclays, Tesco Bank, and Asda. The cyber attack resulted in significant upheavals in operations for around a month as at times the staff could not use computers to keep track of their currency trading. Though Travelex did not disclose full details, it was a gang called Sodinokibi that allegedly accessed sensitive customer data and demanded a ransom of £4.6 million.
Travelex is a foreign exchange company headquartered in London with global operations in around 26 countries. Its main businesses are international payments, foreign currency exchange, issuing prepaid credit cards for use by travelers, and global remittance.
Travelers are cautious of overseas trips
Despite the governments lifting travel restrictions, the social distancing measures, quarantines rules for international travel, and recent spike in the Covid-19 infections have put a limit to overseas travels. It is argued that the tourist related activities form a major chunk of the businesses for foreign exchange companies. But as the world continues to fight the coronavirus in the absence of a vaccine, the contribution of tourists to the businesses of foreign exchange companies is unlikely to improve in the near future. Rising unemployment, and pay cuts have added to the worries of the travelers and traveling abroad for holidays remains the last thing on people’s plans. Loss in businesses and teleconferencing facilities have cut the business travel as well.
Given the recent spike in the coronavirus infections in tourist hotspots among neighbouring countries, the UK government has recently imposed a 14-day quarantine rule for travelers returning home from Spain. This was announced only a few days after the government presented a list of around 70 countries as safe for travel. Some reports suggest that countries like France, Germany, and Croatia could be the next in line to be removed from the list of safe countries. According to an estimate, approximately 14 million British travelers will prefer to spend their 2020 summer holidays within the country before the schools reopen in September 2020.
In the foreign exchange market, generally trends are projected based on interest rate and other market related data. The global pandemic has brought a situation of uncertainty in which things are changing at a quick pace making it difficult to make correct predictions. In these ambiguous times, experts suggest to adopt necessary means for protection against foreign exchange exposure. In addition to the coronavirus pandemic, the Brexit deadline of this year end could possibly add to more worries. Apart from all these factors, a major contributor to the business of companies involved in foreign exchange are the tourists. As world is actively struggling with the coronavirus led crisis without a vaccine, it remains to be seen how soon the travelers gain confidence to pack their bags for an overseas trip and start exchanging the currencies.
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