Will Corporate Travel Management resume trading in time to avoid the June 30 axe?

Will Corporate Travel Management resume trading? Investors wondering that question will be put out of their misery one way or the other in less than a month from now. Corporate Travel Management (ASX:CTD) will be delisted after June 30 if it does not lodge all overdue financial reports and satisfy the ASX that it is fit to resume trading. But will it.

The reality CTD finds itself in

It has been a long time in suspension, and things have gotten worse not better. At first investors thought it was a simple issue of revenues being recognised in the incorrect year. But it was much broader than that, it appeared its books may have been ‘wrong’ for years in the sense of when revenues were recognised.

And then there’s how it overcharged the UK Home Office. At first investors thought it was just a discrepancy, but then it was a reversal, then a restatement, then a liability that is now £118 million.

Jamie Pherous departed in February. Now he was not personally accused of wrongdoing, but the departure of the founder who’d been there the whole time magnified how grave the situation was. It was a mid-ranking executive who was purportedly to blame, someone who knew what was going on but assured his colleagues and bosses it was all fine, knowing full well it either wasn’t or would blow up one day.

Since Pherous left, CTM has been trying to rebuild the structure around the UK business. The company terminated the executive responsible for the region. It brought in new oversight. It began negotiating staged refund arrangements with the UK government – although this will only happen (at least in time for June 30) if CTD can borrow money to repay British taxpayers.

Progressing, but fast enough to meet the deadline?

CTD has disclosed that it held more than A$115m in cash and had access to additional debt facilities, although most of that debt required lender approval before it could be drawn. According to the AFR, it was a syndicate of HSBC, CBA and Westpac, and the debt would go towards repaying British taxpayers.

The company insisted that discussions with lenders (and the UK government) were progressing and that it was committed to resolving the matter fully. But progression is not the same as completion, and the former won’t be good enough for the ASX. Here’s a detail that raises our eyebrows (and should raise yours too): This deal was informally agreed on in last December but the money has not been provided yet over a number of issues including the exact amount to provided and the security behind the loan.

Will the company meet the deadline?

The question now is whether CTM can realistically meet the deadline. Spoiler alert: If we were betting on it, we’d say no.

Either way, the answer depends on three things: the state of the accounts, the finalisation of the UK liability, and the willingness of lenders to support the company through the transition. On all three fronts, the signals are…well…mixed is the best thing you can say.

The accounts remain incomplete. CTD has been working on them for months, but the complexity of the restatements has slowed everything down. Auditors cannot sign off until they know the final exposure to the UK government, and that exposure has been a moving target. Auditors know their careers are at stake.

The company has said that refund negotiations are well advanced, but “advanced” is not the same as “finalised,” and without a final number the auditors cannot close the books.

Support from CTD’s lenders is another variable. The company has undrawn debt facilities, but access to most of that funding requires the board to attest to solvency. That is not a formality. It is a legal statement with consequences. If the board cannot make that attestation confidently, the debt remains locked. And if the debt remains locked, CTM’s liquidity becomes…a lot more thin than it otherwise would be. We cannot say it has no liquidity because it has not released its books.

The bottom line is that company must complete the audit, finalise the liability, satisfy the ASX, and reassure lenders: all at the same time. That is a difficult sequence even in stable conditions. It is significantly harder when the company is dealing with the fallout of a multi‑year accounting failure.

What if CTD resumes trading

If CTM does meet the deadline and resumes trading, the market reaction will be immediate. Stocks suspended as long as CTD have do not drift back into the market quietly. Investors will sell as soon as they have the chance to get out. The question is how many will buy on speculation – that’ll depend on how well any issues are resolved. The business itself is not broken. It still has clients, contracts, and global operations. But the longer this goes on, the bigger hit to its reputation.

If CTD misses the deadline and is delisted, may not necessarily be fatal. Hypothetically the company could finalise its accounts late – too late to be reinstated; but continue operating as a private entity.

Shareholders would arguably be just as stuck as if it delisted because it’d be hard to sell until/unless CTD was subject to a corporate transaction. But if the egg that is CTD’s financials was too difficult to unscramble, then that could be the end. Obviously investors who put money in will lose it all, and management’s reputation will be soured permanently.

Will Corporate Travel Management resume trading

Each day the deadline looms without news, the more it looks like it won’t. Because the window is narrowing by the hour. The work remaining is significant. The deadline is fixed. And the ASX has already shown that it will not bend the rules.

CTD may still survive as a company if is delisted. But it cannot survive indefinitely without resolving the issues that caused the suspension in the first place. However this saga plays out, we’ll have closure in the coming month.