France to Lose Out on Billions in Payouts From Weakened Firms

(Bloomberg) --

The cost of the global pandemic is mounting for France, with the scrapping of dividend payments by struggling companies likely to cost the government about 2 billion euros ($2.2 billion) this year.

The shortfall will come on top of the massive support the state has offered for corporate payrolls and in liquidity, according to Martin Vial, head of the country's state shareholding agency known as APE. The economic shock of the coronavirus pandemic is taking its toll, he said.

“We have identified about 20 very big companies that have been made very vulnerable by this crisis and that will undoubtedly need their capital bolstered,” he said Tuesday in an interview on BFM Business. While declining to identify them, he said the agency plans to intervene in a “second wave” of support to make sure they remain solvent.

France has holdings in some 88 companies representing a broad swathe of the economy, including some that have felt the brunt of the pandemic like Air France-KLM, Renault SA and airport operator Aeroports de Paris. The country last week tightened restrictions on foreign investment after the government said the virus outbreak has left key assets vulnerable to takeovers.

“There is a risk that predators take advantage of the crisis and market volatility to get their hands on French and European companies,” Vial said.

The shareholding agency still has financial ammunition to help companies, he said, reiterating the government's line that there is “no taboo” about potential nationalizations. The priority, however, will be to ensure large, vulnerable companies have access to enough cash. He also commented on individual firms where the government holds a stake.

On Airbus:

Airbus SE has bolstered its balance sheet, but the aviation sector is “shocked” by the health crisis and plane orders are disappearing
The Toulouse-based jet maker will have to “manage an extremely critical situation.”

On Renault:

Renault is poised to get a state-backed loan of 5 billion euros that will come with a pledge from the carmaker on lowering emissions and focusing on electric vehicles
A rebalancing of Renault and partner Nissan Motor Co.'s cross-shareholdings is “not on the table”

On Air France-KLM

Air France-KLM bailout is unique because company has now pledged to leave some domestic French routes in favor of rail service
French and Dutch government shareholders will consider any capital increase for the airline down the road, but for the moment there isn't any visibility on the state of air travel in the coming months.