France to Block Financial Aid For Companies Paying Dividends

(Bloomberg) --

The French government said it will cut or withhold financial support from companies paying dividends and urged boards to preserve liquidity to support staff and operations amid the economic fallout from the coronavirus.

All companies that have delayed tax payments will have to reimburse the state and pay penalties if they proceed with dividends, Finance Minister Bruno Le Maire said. Any big corporations that flaunt the call to stop payouts will also cease to be eligible for the 300 billion euros of loan guarantees France is offering companies.

“Today, money must go into the business, into investment and to employees and their training,” Le Maire said on French television BFMTV. “Shareholders can wait for the return of better days.”

Boards already faced mounting pressure to trim or scrap payouts as lockdowns across the globe put millions out of work and force governments to prepare massive bailout packages for companies.

In France, the government has budgeted 45 billion euros ($50 billion) for measures to delay taxes and pay the wages of workers furloughed by struggling companies. With the cost of the measures expected to rise further as the confinement continues, Le Maire urged any company to show the “utmost moderation” with dividends.

Several unions in the energy industry demanded this week that EDF SA, Engie SA and Total SA cancel dividends this year to ensure shareholders also assume some of the burden of riding out the global economic slump caused by the coronavirus pandemic.

Le Maire said the government would vote against dividends at companies where it holds a stake if those companies have benefited from a state-aid measure.

Jean-Pierre Clamadieu, chairman of Engie, in which the state holds 24%, said Friday that while questions about dividends were “good,” it’s up to the board to decide. The priority is to ensure the medium- and long-term future of Engie, he said on BFM Business television, adding that the gas and electricity company had extremely solid liquidity and resilient businesses.

Given the magnitude of the crisis, some companies have already announced moves to reallocate their cash flow. Airbus SE, Safran SA, Unibail-Rodamco-Westfield, BIC SA, JCDecaux SA and Altran SA have either reduced their dividends for 2019 or scrapped them altogether. Some have taken a softer approach and only deferred payment, such as M6 SA. Others are also eliminating share buyback programs.

©2020 Bloomberg L.P.

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