[ad_1]
What Billion State Credit Means For Adidas
The | Reading time: 3 minutes.
Adidas promises $ 1 billion loan in corona crisis
Sporting goods maker Adidas is making fresh money to survive the crown crisis. € 2.4 billion is expected to come from state development bank KfW.
Adidas receives credit lines of more than three billion euros in the crown crisis. The deadline until the summer of 2021 indicates a longer period of weakness at the Herzogenaurach sporting goods company.
ORTo avoid a liquidity constraint on Adidas, the federal government granted the sporting goods group a € 2.4 billion line of credit. Seven private banks grant another 600 million euros. This means that Europe’s largest sporting goods group has a total of three billion euros in new lines of credit, Adidas said on Tuesday.
Obviously there are no particularly favorable conditions. The state development bank KfW is said to be making the loan “under normal market conditions,” but has an 80 percent risk share to salvage the exceptional situation.
As a result of the crown pandemic, Adidas had to close most of its own stores and points of sale worldwide, causing a drop in sales. About 60 percent of the business has been gone for weeks. Like some retail chains, Adidas initially wanted to pay the April 22 rent from its own stores in Germany to keep the cash on hand. After harsh public protests and boycotts, Adidas backed off and apologized.
The term of the line of credit now granted is remarkable. After all, it will be awarded for 15 months, that is, until July 2021. Apparently, Adidas doesn’t expect a quick recovery after the current depression in the worst case scenario.
Adidas is another prominent company that is financially secured with government loans. For example, a 1.8 billion euro loan is known to the TUI travel group and Lufthansa is likely to receive billions of KfW loans as well.
Although Adidas still posted record results in 2019, shareholders must at least temporarily forego the previously announced dividend from last year. As Adidas announced, the terms of the syndicated loan include a “de facto suspension of dividend payments” during the term of the loan agreement. This means that initially three quarters of a billion euros will not be distributed. It remains open if there will be an additional payment later.
In addition to KfW, the credit consortium includes private banks UniCredit, Bank of America, Citibank, Deutsche Bank, HSBC, Mizuho Bank and Standard Chartered Bank.
According to Adidas CEO Kasper Rorsted, the current situation posed serious challenges even for healthy companies due to the crown pandemic. “We would like to thank the government for acting quickly and comprehensively in response to this unprecedented global crisis,” said Rorsted.
Board salaries must be cut
Adidas also announced strict control of all costs, reduction of the board of directors and compensation for senior management, and suspension of the share buyback program. “We will pay off the parts of the loan that have been used, including interest and fees, as quickly as possible,” said the head of Adidas. Using the syndicated loan does not lead to state participation in the sporting goods group, according to Adidas.
The group has 60,000 employees worldwide, including 7,700 in Germany. The super credit now agreed is well received by the works council and union circles because it helps secure employment.
