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The government will unveil new emergency measures designed to keep companies operating during the coronavirus crisis, with rescue packages targeting some of the UK’s largest companies, as well as startups struggling to stay afloat.
On Friday, Foreign Minister Rishi Sunak will launch a long-awaited loan plan for companies in the “tight medium” that cannot take advantage of existing programs that the Treasury launched shortly after the country was blocked on March 23.
Troubled companies with a turnover of more than £ 45 million will be able to access state-backed bank loans of up to £ 50 million, with no upper limit on the size of companies that can access the scheme.
“I want to make sure that no viable business slips through our supporting safety net as we help protect jobs and the economy,” said Mr. Sunak.
Keith Morgan, chief executive of the British Business Bank, which will help operate the scheme, said: “More financing for viable medium and large companies will help them protect jobs and be in a better position to resume normal business when the current pandemic wears off. . “
Treasury officials are also working on separate proposals to provide funds to fast-growing startups backed by venture capital firms, which have often been excluded from existing schemes because they are not profitable.
An announcement is expected next week about the startup plan, which, as currently envisioned, could see the government end up with stakes in some of the UK’s fastest growing companies. The scheme is likely to offer companies state-backed “convertible” debt if matched by funds from its venture capital sponsors.
These loan notes would automatically convert to a share in the business, usually at a discount, unless paid.
Authorities were still working on details of the plan on Thursday, but people familiar with the matter said one option was for the government to match pound-for-pound funding up to £ 12.5 million for a total injection of £ 25 million.
Treasury work on the schemes has become more urgent in recent days to ensure funds are available, and many companies in the UK are quickly running out of cash with the shutdown already in its fourth week and now extended by another three weeks.
The Treasury promised to tackle this “reduced environment” of companies earlier this month, with thousands of companies too large for the scheme focused on SMEs concerned with surviving the crisis.
Both schemes seek to address gaps in coverage of the government’s existing bailout package, which has set aside £ 330 billion in funds under two schemes.
One, targeting smaller companies with a turnover of less than £ 45 million, offers state guarantees on 80 percent of loans of up to £ 5 million. The other offers companies with an investment grade rating access to a Bank of England commercial paper scheme.
The new scheme for companies with a turnover of more than £ 45m but less than £ 500m will offer access to loans of up to £ 25m from their banks, with the government guaranteeing 80 percent of the debt. Larger companies will be able to take advantage of up to £ 50 million in loans with similar guarantees.
Unlike smaller companies, which offer interest-free loans for up to one year, this scheme will allow banks to lend at commercial interest rates.
About 10,000 companies are expected to fall into this group, according to people familiar with the situation, including many companies listed in the FTSE 250 who cannot obtain an investment grade rating to access the Bank of Mexico’s commercial paper scheme. England.
The banks “will work throughout the weekend to launch this plan on Monday,” said Stephen Jones, the UK’s chief financial officer.
Unlike the smaller company scheme, loans will have an interest rate decided by banks, but the state guarantee is expected to encourage loans to companies struggling to survive the pandemic who would otherwise be unable to access cash so necessary.
The proposals are also intended to provide some relief to private equity-backed companies, which have been concerned that banks will judge whether they are eligible for emergency loans on the overall size of the parent company’s portfolio.
Officials are expected to allow these companies to be judged on their own account, rather than that of their private equity sponsors, meaning that multiple companies owned by the same investors can access the funds.
Additional reporting by Sebastian Payne and Tim Bradshaw
