should we position ourselves on companies in difficulty?

What should we think of state aid to listed companies? Are they out of the woods yet? Here are our tips to best guide your investments.

Some tenors and midcaps on the Paris coast have applied for and obtained a State Guaranteed Loan (PGE). These lines of credit, almost entirely guaranteed by the state, aim as much to limit an increase in unemployment and bankruptcies as to allow companies to see the light of day.
Here are the stocks that benefited from these aids and some tips to follow to enhance your portfolio.

To great ills, great remedies. With a French economy at 67% of its potential, according to INSEE, the public authorities have drawn a weapon of massive recovery: 100 billion euros for State Guaranteed Loans (PGE) for companies in difficulty. Thus, for those with fewer than 5,000 employees and with a turnover of less than 1.5 billion, 90% of the amounts raised from banks are “guaranteed”. Above these thresholds, the guarantee falls to 70 or 80%. As of April 30, nearly € 48 billion has been injected into 400,000 companies, including several listed companies, for sums ranging from 500,000 euros (Drone-Volt) to 7 billion euros (Air France-KLM).

Fnac-Darty: first company to get help from the EMP

Fnac-Darty is the first on the list to obtain this EMP, with a credit line of 500 million euros guaranteed at 70%. In the first quarter, its turnover fell 10.3% to 1.49 billion euros. The company can only count on a gradual and partial restart, the Ile-de-France shopping centers of more than 40,000 square meters, such as Vélizy or Parly2, remaining closed. Note that its parent company, Ceconomy, has requested aid of 2 billion euros from the German government.
We will abstain on the title for the moment.

Air France KLM get the most consistent help

Nearly 7 billion euros while KLM negotiates aid of four billion covered by the Netherlands. In return, the company will have to cut domestic lines and will renew part of its fleet. So much the better for Airbus and its suppliers like Latécoère, which obtains a PGE of 60 million euros. Whether this will be enough for a company with a quarterly net loss of 1.8 billion euros remains to be seen. The bank pool solicited has drawn attention, worried about a public commitment initially capped at 70% of bank loans. The state injected $ 3 billion directly and accepted a breach of the EMP principle, giving it a 90% guarantee.
We are staying away from the file due to weak governance and union control.

Renault: benefits from the EMP at a lower amount

Renault is in second place with an EMP of 5 billion euros. The manufacturer will need it well: in March, its world sales fell by 46%! A misfortune never occurring alone, the plan to restart the Sandouville factory has been dismissed by the courts. This delays the return to better fortune of a manufacturer entangled in its alliance with Nissan-Mitsubishi. Note that PSA did not request the public guarantee, like Michelin. The Sochaux group still negotiated a bank credit line of 4 billion euros.
We can buy these three securities on a downturn for their very low valuation.

Companies without long-term visibility

Forced to stop completely, the lessor Europcar obtained 223 million euros 90% guaranteed by the state. The group announced a quarterly net loss of 105 million euros and 850 million euros in savings.
This highly speculative dossier calls for caution in the absence of visibility on the long-term economic model.

Yes Accor Invest, the property owner of the walls of the eponymous group, has renounced a PGE of 500 million euros, Nexans is still negotiating for an amount of 280 million euros. Tourism will continue to suffer for several quarters.
We will stay away from the Accord title. Same advice for Nexans, which remains strongly subject to economic cycles.

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