LONDON/MUMBAI (Reuters Breakingviews) – Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
Signage for Premier Inn is seen on the outside of one of their hotels in London, Britain, March 30, 2016.
– UK hotel jobs
– French waste deal
– Garuda turbulence
PANIC ROOM. With Britain teetering on the brink of a second national lockdown, Whitbread is bowing to the inevitable. After announcing a 78% slump in like-for-like domestic revenue in the 26 weeks to Aug. 27, the 4 billion pound operator of Premier Inn hotels and Beefeater pubs said it would lay off as many as 6,000 people, or 18% of its workforce. Swallowing the 12 million pounds to 15 million pounds in redundancy costs is an acceptance that things are unlikely to improve any time soon.
These workers like most Whitbread staff are on flexible furlough. Under the scheme, the government pays at least 80% of salaries up to a cap, even when staff arent working. But the Treasury has been tapering its support, with employers meeting the shortfall. Whitbread is evidence that without a blank cheque, the costly job-retention schemes merely delay the reckoning. (By Dasha Afanasieva)
POT-DE-VIN. If persuasion fails, try bribery. Such is Suezs approach to investor relations. On Tuesday, the French waste management company tried to fend off a potential hostile bid from rival Veolia by pledging to hand shareholders 2 billion euros in bumper dividends and buybacks over the next two years. Thats more than a fifth of its current market value. The promised largesse comes after state-backed Engie, which holds 30% of Suez, told Veolia to raise a 15.50 euro per share offer for its stake.
Suez boss Bertrand Camus munificence relies on cost cuts and sales growth to achieve 1.7 billion euros of operating profit by 2022 on revenue of 17 billion euros. That implies a meaty 220 basis point expansion in annual margins. So far, the bullishness is failing to sway investors waiting for a possible raised cash bid from Veolia: Suez shares edged up a paltry 0.6%. (By Christopher Thompson)
STALLING. Indonesias Garuda is flying low but reckons bankruptcy is off the table. The flag carrier has weighed up insolvency proceedings but will instead seek better terms on its aircraft loans, according to Bloomberg. The airline, which has $5.4 billion of leasing debt, has already delayed repayment of an Islamic bond but says an expected $580 million bridging loan from the government is taking longer than expected. Time is of the essence.
The carriers shares have fallen 55% so far this year, slightly worse than Thai Airways, which secured court approval this month for a restructuring. Like its Asian rivals, Garuda is counting on a speedy revival in domestic tourism as tough restrictions on international arrivals remain in place. With the virus raging across Indonesia, however, its going to be a long and bumpy ride. (By Una Galani)
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Breakingviews – Corona Capital: UK jobs, French waste, Garuda – Reuters
