German listed companies will be asked to suspend dividend payments to qualify for assistance designed to ease the impact of the coronavirus crisis.
The government will be able to set conditions on dividends as part of an aid program involving loans and guarantees from state bank KfW and the goal is that credit does not end up being disbursed to shareholders, an Economy Ministry spokesman said at a regular news conference in Berlin. He confirmed an earlier Bloomberg News report. The KfW declined to comment.
Chancellor Angela Merkel’s government on Friday secured final parliamentary approval for a package of measures totaling more than 750 billion euros ($827 billion) to address the economic fallout from the virus. On top of that, the KfW has 500 billion euros available to boost the liquidity of companies struggling with a collapse in demand.
As the impact of the virus spreads, companies across Europe are coming under increased pressure to defer dividend payments to preserve cash. Regulators such as the European Central Bank have already pushed banks to hold off on such payouts to increase their resilience.
Germany’s Commerzbank AG, in which the government holds a stake of 15.6% -- a legacy of the financial crisis -- said Monday it won’t propose a 2019 dividend due to the ECB’s recommendation.
Germany is in line with neighbor France in insisting firms asking for aid forgo dividend payments. All companies that have delayed tax liabilities will have to reimburse the state and pay penalties if they proceed with dividends, Finance Minister Bruno Le Maire has said. Any big corporations that flaunt the call to stop payouts will also cease to be eligible for 300 billion euros of loan guarantees.
The German policy on dividends was evident in a 1.8 billion-euro credit line for TUI AG announced March 27. “One of the conditions of the KfW loan is that TUI de facto waives dividend payments for the term of the credit line,” the tourism company said in a statement.
Deutsche Lufthansa AG is among German firms to have said they will suspend their dividends, along with the likes of battery maker Varta AG and car rental company Sixt SE. Lufthansa has also said it’s talking to KfW about a loan.
Germany will also demand cuts in wages and bonuses for senior managers of companies that apply for financial aid, German Economy Minister Peter Altmaier said at the weekend.
“It’s important to me that management boards and senior executives contribute in emergencies, especially with respect to bonus payments,” Altmaier said in an interview with the Frankfurter Allgemeine Zeitung newspaper.
(Updates with background on dividends from fifth paragraph)
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