Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
Latest
– French power failure
– Czech cheque for Metro
– Air France-KLM warning
Power surge. French electricity giant EDF may be close to short-circuiting again. Dampened power demand could mean the $31 billion state-owned utility gets extra capital later this year, French newspaper Les Echos reported on Monday, three years after it raised 4 billion euros. Net debt of 42 billion euros is equivalent to a toppy 3 times estimated 2020 EBITDA, according to Refinitiv data. Bringing that down to 2.6 times implies boss Jean-Bernard Levy needs some 2.2 billion euros from investors who have sent shares down 14% year-to-date.
The pandemic has seen the dividend axed, raising questions about whether a company which is already 84% owned by the government is suited for public markets. In response, Levy has pledged 3 billion euros in disposals by 2022. He could also spin off the lucrative renewable energy division. That would at least show that President Emmanuel Macron’s privatisation drive isn’t totally dead. (By Christopher Thompson)
Cheque, mate. Metro’s largest shareholder is using the pandemic to increase its grip on the German wholesaler. Buyout firm EP Global Commerce, which already indirectly owns 29.99% of the company, on Sunday launched a new tender offer. The vehicle, owned by Czech and Slovak investors Daniel Kretinsky and Patrik Tkac, plans to bid 8.48 euros per ordinary share and some 8.87 euros per preference share, with the aim of lifting its stake above 30%.
The approach, which boosted Metro’s ordinary shares 6.5% to 8.92 euros on Monday morning, is opportunistic. The stock has halved since last June, when the investing duo made an unsolicited offer valuing the company at 5.8 billion euros. Since then, its customer base of restaurants and hotels have come under strain. But the investors can avoid bidding for the entire company by stating that they have no intention of controlling more than 50% of the company. It makes sense to pick up cheap stock, if they can. (By Aimee Donnellan)
Padded seats. Were France and the Netherlands too generous to Air France-KLM? Thanks to 10.4 billion euros of state bailout loans and guarantees, the airline had 14.2 billion euros of liquidity on tap at the end of June. Even though it’s burning through 10 million euros a day, that’s enough to keep it airborne until mid-2024, by when even the most pessimistic industry-watchers believe things will have returned to some kind of normal.
With so much leeway, unions are digging in against aggressive staff cuts. National tensions – both the French and Dutch governments hold 14% stakes – may also be getting in the way. KLM is ditching 20% of its staff, while the flabbier Air France is shrinking its workforce by 16%. Dutch Finance Minister Wopke Hoekstra is getting nervous, saying on Sunday that the airline’s future might be in doubt. The problem is that he’s removed the immediate financial pressure. (By Ed Cropley)
