Adidas secures 3 billion euros government backed loan amid coronavirus crisis

Following the severe impact on its business from the global spread of the coronavirus pandemic, Adidas has announced that the company received the approval of the German government for the participation of KfW, Germany’s state-owned development bank, in a syndicated revolving loan facility amounting to 3 billion euros at customary market conditions to bridge this unprecedented situation.

“The current situation poses a serious challenge even for healthy companies. We thank the German government for its fast and comprehensive course of action in response to this unprecedented global crisis,” said Adidas CEO Kasper Rorsted, adding, “We are implementing numerous measures including the establishment of strict cost and working capital controls, the reduction of management compensation, the stop of the share buyback program as well as the suspension of dividend payments. But on top of this, access to additional liquidity is key to weather this crisis. We will repay any used portion of the loan, including interest and fees, as quickly as possible.”

Adidas receives 3 billion euros in loan to manage liquidity amid crisis

The yet to be concluded syndicated loan, the company said in a statement, comprises a loan commitment of 2.4 billion euros from KfW and 600 million euros in loan commitments from a consortium of the company’s partner banks consisting of UniCredit, Bank of America, Citibank, Deutsche Bank, HSBC, Mizuho Bank and Standard Chartered Bank.

The company added that one of the conditions of the syndicated loan is that Adidas de facto suspends dividend payments for the duration of the facility. The company’s executive board recently took the decision to stop the repurchasing of Adidas shares as well as to forgo its short- and long-term bonus for the year 2020, which accounts for a total of 65 percent of the target annual compensation. The long-term bonus component for the next leadership levels within the company will also be forfeited for the current year.

Adidas sees drastic drop in revenue and profit in China, Japan and South Korea

In addition to the significant revenue and profit decline the company has been experiencing in China since the end of January as well as in Japan and South Korea from late February onwards, Adidas said, it has also seen a severe impact on its revenues and cash generation in most other parts of the world since mid-March. Following the rapid global spread of the coronavirus almost all company-owned- and partner-operated stores across Europe, North America, Latin America, Emerging Markets, Russia/CIS and large parts of Asia-Pacific have been temporarily closed for the last four weeks. As a result, the wholesale and physical retail activities in these markets, which usually account for 60 percent of the company’s business, have come to a complete standstill.

The company further said that in light of those severe consequences, the company has reached an agreement with the local works councils to reduce working hours for several employee groups in Germany. Among other things, this agreement provides for paid leave, a reduction in overtime and also short-time working for 1,200 employees.

Picture:Adidas media centre