Almost £1.4bn of cheap debt issued by the Bank of England to secure the survival of some of the UK’s larger companies during the coronavirus pandemic is still to be repaid before the scheme closes next month.
The Covid Corporate Financing Facility will be the first of the government’s emergency loans programmes to come to an end with full repayment due by the end of March, two years after it launched in the early days of the pandemic.
With weeks until its end, nine companies, including London Gatwick airport, whose French majority owner Vinci more than doubled its dividend last year to €1.5bn, are still using the CCFF, according to BoE data.
Under the terms of the scheme, businesses using the facility were limited in their ability to pay dividends, but this restriction did not extend to parent companies such as Vinci, which owns 51 per cent of the UK’s second largest airport.
Other investors in Gatwick — which like the rest of the aviation sector was hard hit by restrictions on international travel during the pandemic — include the Abu Dhabi Investment Authority and Australia’s sovereign wealth fund.
Gatwick, which has £275mn in commercial paper outstanding, said the facility would be repaid in March, adding that the dividends paid by Vinci were “not in breach of the scheme”.
Stagecoach still has £300mn outstanding, the largest amount of the nine companies, according to the data. The bus and coach operator reported a pre-tax profit increase of nearly six-fold to £31.1mn in the six months to October 30, and gave a “positive outlook” on the year ahead. Since then it has agreed to a takeover by rival National Express, subject to regulatory approval.
Stagecoach said that using the facility “boosted our available liquidity whilst faced with the uncertainties of the pandemic, although we have not required that liquidity and we intend to repay the borrowings in full by March 2022”. Both National Express and another rival FirstGroup have repaid their debts to the CCFF.
Overall, the BoE made £85bn available to 230 companies but only 107 businesses ultimately accessed the facility, drawing down £37bn before the CCFF closed to new purchases of commercial paper in March 2021.
Many companies continued to tap the facility — a source of taxpayer-backed cheap finance — while the level of coronavirus restrictions in the UK fluctuated throughout last year.
The CCFF was launched in March 2020 as a means of providing low cost debt to support cash flow among larger companies that would otherwise struggle to access finance.
When chancellor Rishi Sunak announced the facility, he said it would support companies affected by a short-term funding squeeze that were “unable to access financial markets in this uncertain operating environment”.
He described it as “bridging support to see through the temporary nature of Covid-19 related disruption . . . over the coming year” with the Bank of England purchasing a company’s short-term debt.
The scheme was also open to British businesses owned by overseas companies. Australian-based Flight Centre still has £115mn outstanding, which its European CFO Adam Murray said it would repay next month. “To date we have only utilised a small percentage of the full loan drawn down. Where we have utilised the CCFF funds these have been to fund short-term working capital needs as travel has started to recover,” he said.
Aim-listed airline Jet2 still has £200mn outstanding, while rivals that tapped the facility, such as Ryanair, Wizz Air and British Airways’ owner IAG have repaid their debt.
Jet2 said: “We drew the £200mn in mid-March 2021 and will be repaying it in mid-March this year on maturity. The facility provided standby liquidity only.”
The BoE said that the CCFF successfully met its objective of alleviating pressures on companies’ cash flows created by the economic disruption caused by the Covid-19 pandemic.
The Treasury said that “thanks to the scheme, firms that employ almost 2.5mn people were directly supported including those in the car industry, travel, hospitality, and high street stores. Firms with outstanding loans in the scheme must pay them off by March 2022 at the latest.”