Multinationals repay emergency Covid loans in UK

Updates to the Covid Corporate Finance Mechanism

US oil services group Baker Hughes has settled a £ 600million Covid emergency loan, the latest multinational to repay a UK financing facility that has drawn the attention of MPs to its use by companies still paying billions to shareholders.

More than £ 2.6bn has been handed over to investors by overseas-headquartered companies which, last week, continued to use the Bank of England’s Covid debt program for more than one year after its launch.

The Covid Business Finance Facility was designed to “provide temporary direct support to high quality businesses with short-term cash flow issues” – providing access to very cheap finance through the Bank.

However, FT’s analysis shows that more than half a dozen large multinationals have been using the facility for the past year while also finding money for large and often increased dividend payouts.

The companies include Baker Hughes, Boots, Spanish energy company Iberdrola and infrastructure group ACS, Mexican industrial conglomerate Orbia, Israeli chemicals maker ICL Group, and Australian engineer Worley. Much of the money is maturing this month.

BoE data last week confirmed Baker Hughes had repaid the £ 600million he borrowed, using a UK subsidiary established last April.

MP Margaret Hodge, former chair of the public accounts committee, said it was “a complete shame that huge global corporations are borrowing taxpayer-funded money while increasing their dividends at the same time. To line the pockets of shareholders is a total abuse of taxpayers’ money and the executives of these companies should bow their heads in shame. “

Other companies – including BASF and Bayer – paid off their debts sooner after the economic shock from Covid turned out to have less of an impact on their finances than initially feared.

In mid-May last year, the BoE closed the loophole for companies to pay dividends and raise wages while using the program. But those who used the facility before were able to pour cash from their balance sheets for wages and dividends.

All companies classified in the investment category and making a significant contribution to the UK economy, including through subsidiaries, are eligible for the program.

Baker Hughes paid out $ 131 million in dividends in the first three months of the year. In 2020, he paid $ 488 million, up from $ 395 million in 2019.

Orbia, which has several subsidiaries in the UK and has borrowed £ 300million through CCFF, paid dividends of $ 230million and repurchased $ 42million of shares in calendar year 2020.

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Iberdrola, which owns Scottish Power and has borrowed £ 100million under the scheme, said the facility would be repaid this month. “In 2020, the impact of Covid on our UK business was in the order of € 130 million,” the company said. “The fund has supported our business activities in the UK at a time of volatility. “

Retailer Walgreens Boots Alliance, which borrowed £ 300million from the BoE through its UK Boots operation, this month declared a quarterly dividend of 46.75 cents per share, unchanged from the previous quarter but up by 2.2% compared to the previous year. He paid $ 808 million in the six months ending in late February.

WBA said Covid cost its pharmacy division around $ 690 million in the last fiscal year, “of which Boots is the major part.” He added that the dividend payments reflected “the long-term outlook of the company”, and that the December dividend “was funded by US credit facilities.” The loan will be repaid next week as planned, he said.

Worley UK took £ 155million through CCFF, which she said would be repaid by May 18. Its parent company paid A $ 260m (£ 187m) in 2020 dividends, almost double the previous year. Worley said it was “an investment grade rated company that makes a significant contribution to the UK economy”.

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