Dividend Ban as a condition of Government Loans

[Alaric]

This comes from the Daily Mail, so may just be a kite.

https://www.dailymail.co.uk/money/marke ... ended.html

Large businesses will be able to borrow up to £200million as the Government has quadrupled the size of loans available, but those taking them up will have to stop paying dividends and limit executive pay and bonuses.

[vrdiver]

This comes from the Daily Mail, so may just be a kite.

https://www.dailymail.co.uk/money/marke ... ended.html

Large businesses will be able to borrow up to £200million as the Government has quadrupled the size of loans available, but those taking them up will have to stop paying dividends and limit executive pay and bonuses.

My bold.

If it was just dividends, I'd be worried, but I don't think any board is going to take a loan with these conditions unless there really is no other choice!

[dealtn]

This comes from the Daily Mail, so may just be a kite.

https://www.dailymail.co.uk/money/marke ... ended.html

Large businesses will be able to borrow up to £200million as the Government has quadrupled the size of loans available, but those taking them up will have to stop paying dividends and limit executive pay and bonuses.

I'm not going to click on a Daily Mail link, but can you clarify what is referred to here as a "bailed business" and what type of loans they are referring to please?

[Alaric]

but can you clarify what is referred to here as a "bailed business" and what type of loans they are referring to please?

The next two paras go

The Treasury said the taxpayer-backed loans made available to large companies under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) will increase from the previous maximum of £50million.

From next Tuesday, companies will be able to borrow up to 25 per cent of their turnover, up to a maximum of £200million, under the scheme. However, firms which take up the loans will be prevented from doling out cash to investors.

"Bailed" as in bailed out. Precedents being the banks around twelve years ago.

[dealtn]

but can you clarify what is referred to here as a "bailed business" and what type of loans they are referring to please?

The next two paras go

The Treasury said the taxpayer-backed loans made available to large companies under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) will increase from the previous maximum of £50million.

From next Tuesday, companies will be able to borrow up to 25 per cent of their turnover, up to a maximum of £200million, under the scheme. However, firms which take up the loans will be prevented from doling out cash to investors.

"Bailed" as in bailed out. Precedents being the banks around twelve years ago.

Thank you.

It wasn't clear if bailed meant the company wouldn't have survived without the loan, or just that any company utilising the scheme was considered to have been bailed.

I'm sure better news sources will provide clarity in due course.

[johnhemming]

One would assume that while being financed by a low cost government underwritten loan companies cannot pay dividends until they have paid off the loan (even if they pay off the loan with a more expensive commercial loan not underwritten by the government).

[Bouleversee]

I heard the same story on Radio 4 Today programme this morning and it was definitely both items.

[TheMotorcycleBoy]

Germany have similar arrangement in place

viewtopic.php?p=307169#p307169

It makes sense to me. After all if I was a sole trader who made a big loss one year, received a loan from the village collective (for example) to pay my bills and mortgage, it would seem profligate for me to use some of the loan to buy myself a Porsche.

[AsleepInYorkshire]

May help?

Coronavirus: Bosses' bonuses banned in exchange for virus loans
Large firms who borrow from the UK taxpayer will be banned from paying bonuses and dividends, according to the Treasury and the Bank of England.

AiY"t"n'U

[monabri]

I look forward to the reinstatement of my HSBA dividend...

[Dod101]

I look forward to the reinstatement of my HSBA dividend...

Hear hear! Tesco should also be holding its head in shame. I know it was not a loan but it makes the business rates holiday all the worse.

Dod

[MDW1954]

I look forward to the reinstatement of my HSBA dividend...

Hear hear! Tesco should also be holding its head in shame. I know it was not a loan but it makes the business rates holiday all the worse.

Dod

The government could always retrospectively apply the same rules to business rates holidays. Pending that, Tesco is compliant.

MDW1954

[Dod101]

The government could always retrospectively apply the same rules to business rates holidays. Pending that, Tesco is compliant.

MDW1954

Yes and were I a shareholder in Tesco I would feel differently. I appreciate that this has already been discussed but still, it does not seem right.

Dod

[G3lc]

So obviously one should avoid the companies that take this money as in the short to medium term the dividend seeking share holder comes low on who they care about, and perhaps Tesco is the opposite - I have not been a Tesco holder for a long time. Will we be told who takes this money?

[monabri]

So obviously one should avoid the companies that take this money as in the short to medium term the dividend seeking share holder comes low on who they care about, and perhaps Tesco is the opposite - I have not been a Tesco holder for a long time. Will we be told who takes this money?

It would be nice to have a list..

[G3lc]

Some companies could use it as an excuse to stop paying dividends.

[Alaric]

So obviously one should avoid the companies that take this money as in the short to medium term the dividend seeking share holder comes low on who they care about, and perhaps Tesco is the opposite - I have not been a Tesco holder for a long time. Will we be told who takes this money?

There was a comment in the recent Marks & Spencer results
viewtopic.php?f=15&t=23519

Liquidity secured including removal or substantial relaxation of covenants on the £1.1bn revolving credit facility (RCF). Eligibility to the UK Government’s Covid Corporate Financing Facility (CCFF) confirmed and £300m allocated

That's a different loan scheme from the one the Daily Mail and BBC were reporting. Marks have cancelled or suspended their dividend anyway which may not be directly connected to taking up the Government's facility.