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Daily News Roundup: Tuesday, 28th April 2020

Posted: 28th April 2020

BANKING

Rishi Sunak launches bounce back loan scheme for small firms

The Chancellor has launched a new loan scheme for Britain’s smallest firms following intense lobbying over fears millions of businesses would never recover from the coronavirus lockdown. The new "Business Bounce Back" loans will be 100% guaranteed by the taxpayer and will provide firms with up to 25% of their turnover up to £50,000 with no interest payable in the first year. Rishi Sunak has come under fire for the Coronavirus Business Interruption Loan Scheme (CBILS) designed for SMEs after businesses complained that lenders were complicating credit decisions. Under CBILS, firms with turnover of up to £50m are allowed to apply for loans of up to £5m with 80% of the debt backed by the government. Small firms applying under the new scheme need to fill out just a “simple, quick, standard form”, Mr Sunak said, while banks will not need to perform any “forward looking tests of businesses viability”. Yesterday, the Bank of England said banks should rely “on judgement in the absence of financial forecast information” when making credit decisions. UK Finance responded by saying that lenders “will only ask businesses [applying for CBILS-backed lending] for information and data they might reasonably be able to provide at speed.”

Lloyds pauses redundancies

Lloyds Banking Group has paused any reorganisation activity until the end of May telling staff that those already in the redundancy process would continue to be paid until the end of that period. A spokesman said: “We will continue to review these and other commitments to our colleagues for as long as the crisis continues.”

Move fast before rates slashed, savers told

Data firm Moneyfacts is urging savers to move fast if they want to secure one of the remaining savings accounts paying reasonable interest on credit balances. Analysis by the firm says the best rates - from Nationwide's FlexDirect, TSB's Classic Plus and Santander's 123 accounts - are soon to be taken off the market.

PRIVATE EQUITY

Private equity firms seek rule change to gain aid access

The British Private Equity & Venture Capital Association is working with the Treasury and the British Business Bank, along with its counterparts in Europe, to persuade Brussels to adjust EU laws preventing companies deemed to be in financial distress from being bailed out by taxpayers. The "undertaking in difficulty" provisions mean a firm applying to the government's Coronavirus Large Business Interruption Loan Scheme (CLBILS) would be turned down if its accumulated losses exceed 50% of its share capital. Private equity firms typically load the buyout target with debt, sometimes secured from low-tax countries, reducing corporation tax while accumulated losses can also offset future liabilities. They say the European Commission should amend the scheme so businesses that were "funded primarily by debt, are investing heavily to grow and are otherwise performing well (save for the current crisis)" could apply.

INTERNATIONAL

How Goldman’s vampire squid gave way to BlackRock

The FT’s Patrick Jenkins wonders whether Blackrock has usurped Goldman Sachs as the new “vampire squid” with its influence now extending “far beyond its function as a vast asset manager”.

NAB in capital raise after earnings plunge

National Australia Bank plans to raise A$3.5bn ($2.24bn) of capital in a share sale after first-half earnings slumped to A$1.4bn. The bank added that it is setting aside A$2.1bn for bad debt provisions, of which A$807m is directly related to the expected impact of the coronavirus outbreak.

Bank of Japan to tighten grip on corporate bond market

Japan’s central bank could own nearly 50% of outstanding commercial paper and one-sixth of corporate bonds as it boosts liquidity by suppressing yields in the corporate debt market.

AUTOMOTIVE

Aston’s float leaders say avoid shares

Both Goldman Sachs and Deutsche Bank have said they cannot recommend buying Aston Martin stock. Both banks led on the float of the luxury carmaker, pricing the shares at £19. Now they say they are worth between 40p and 45p. Yesterday, Aston shares were up a little from last week's lows, closing ¾p better at 59¼p.

Europe restarts car factories amid uncertain demand

Volkswagen resumed production at its biggest factory in Wolfsburg as part of a broader industry drive to get back to work in Europe, where the coronavirus pandemic has hammered demand and pushed up inventory levels.

AVIATION

Airbus chief executive warns staff firm may not survive

Airbus has issued a warning over the effect that the coronavirus crisis is having on its finances, with a fall in demand for aircraft threatening jobs at the firm. Chief executive Guillaume Faury told staff: “We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company.” The firm is due to report results later this week. Separately, research by the IATA shows that a large number of travellers say they will delay a return to air travel as they assess their personal finances in the wake of coronavirus. Finally, trade body Airlines UK has warned that plans for a two-week quarantine for travellers arriving at British airports would “effectively kill international travel to and from the UK and cause immeasurable damage to the aviation industry.”

Norwegian Air seeks approval for rescue plan

Norwegian Air could run out of cash by mid-May if it fails to win approval for a proposed rescue plan, as the firm said it does not expect to begin increasing the number of flights it operates until next April at the earliest. The Norwegian government offered the carrier a 3bn crown rescue package last month, subject to the airline raising new equity. Norwegian has proposed a debt-to-equity swap in response to the offer, with majority ownership to go to the firm’s lessors, bondholders to be left with 41.7% of the company, and shareholders 5.1%.

Boeing investors could wait ‘years’ for dividend to return

David Calhoun, the CEO of Boeing, told investors at the aircraft manufacturer’s AGM yesterday that paying back its debts would take priority over dividends for several years.

CONSTRUCTION

Redrow announces plans to resume work on sites

Housebuilder Redrow has said it is preparing to restart work on sites with social distancing measures in place. This follows similar announcements from Taylor Wimpey and Bovis Homes’ owner Vistry, with Redrow noting that the number of home reservations has been low as buyers delay moving.

Springfield adds £18m financing

Springfield Properties has secured £18m in additional financing as it awaits a decision on when it can reopen its sites in Scotland. The group said in a COVID-19-related trading update that in light of the current situation it had sealed an extra £18m under its lending facility with Bank of Scotland. It increases the total credit facility to £85m

FINANCIAL SERVICES

Admiral special dividend pulled, with normal dividend to proceed

Admiral Insurance has announced that plans to pay a special dividend of 20.7p per ordinary share have been suspended, although the firm will continue to pay its normal dividend of 56.3 pence. Chief executive David Stevens commented: “We find ourselves in extraordinary circumstances, and it has been a very difficult decision to suspend the special dividend as we are aware of the importance and impact to our shareholders and staff.” The company is also returning some £110m to car and van policyholders as coronavirus restrictions result in less car use.

Insurers are starting to pull trade credit protection

The FT’s Alphaville features excerpts from a letter from Euler Hermes to UK brokers, advising that cover would be withdrawn if credit insurers were not provided with a backstop.

HEALTHCARE

COVID-19 testing boost for Novacyt

Novacyt has signed a contract with the Department of Health and Social Care to supply 288,000 diagnostic tests per week for use in the NHS for an initial six months. The London-listed biotechnology firm is already supplying more than 20 hospitals with its tests after earlier orders from Public Health England.

LEISURE & HOSPITALITY

InterContinental obtains £600m coronavirus loan

InterContinental Hotels Group has secured £600m from the government’s coronavirus relief scheme, as it announced that it expects to record a 25% fall in revenue per room, with a 55% decline last month. The firm said trading in greater China “continues to steadily improve” as coronavirus lockdown restrictions are loosened.

MEDIA & ENTERTAINMENT

Hopes rise for Pearson

Shares in Pearson bounced back by 4.8% from a 17-year low yesterday amid hopes that the educational publisher will benefit from a transition towards digital platforms brought about by COVID-19. Deutsche Bank maintained its "hold" rating on the ground that the business "has the chance to show its suite of online products is well placed to capitalise on the accelerating shift to digital".

REAL ESTATE

Landlord applies to shut down Pizza Express

A landlord has filed a winding-up petition against Pizza Express over unpaid debts, sparking new fears for the future of the ailing chain. Grainrent launched the legal action in the courts as high street tensions grow amid a collapse in business during the lockdown. Unless Pizza Express pays back what it owes, this process would normally lead to a hearing on whether to liquidate the company - putting as many as 14,000 jobs at risk in 627 restaurants. Grainrent's parent firm London and Cambridge Properties said it remains open to compromise with the chain.

RETAIL

John Lewis Partnership considering alliances

The John Lewis Partnership is considering bolstering its services arm and becoming less reliant on retail by teaming up with another business. Chief executive Dame Sharon White said she would launch a strategic review of John Lewis and Waitrose, with sales at the department store chain predicted to fall by as much as 35% as all 50 branches remain shut under lockdown restrictions.

SPORT

F1 flags July restart in race to protect revenues

Formula One wants to resume racing in July in an effort to protect revenue from broadcasting deals. The first few races, including Silverstone, would not take place in front of fans, F1 said, adding that the championship will be contested over 15-18 races instead of 22.

ECONOMY

Business confidence slumps to 12-year low

The latest Lloyds Bank business barometer shows business confidence is at its lowest level in more than a decade with the lockdown pushing the index down 38 points to -32%. The reading is the lowest recorded since December 2008, when the index registered -33%. Manufacturing, retail and transport services saw the steepest fall in confidence.

Markets begin the week in a good mood

Global markets reacted positively to news countries were looking to ease their coronavirus lockdowns with European indices buoyed by Italy’s proposals. The German Dax and French Cac 40 rose by 3.13% and 2.55% respectively while the FTSE was also strengthened, rising 94.56 points, or 1.6%, at 5,846.79. In the US, the Dow Jones lifted after some states said they would relax their lockdown rules.

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