Brief: All UK companies should test staff for coronavirus every week in order to bring more people back to their offices, according to the boss of one of the UK’s most influential business lobby groups. Karan Bilimoria, the president of the Confederation of British Industry - the body which represents 190,000 businesses, together employing nearly seven million employees - told Financial News that the government should offer free Covid-19 testing to the UK’s entire population. The move would encourage more people back to the workplace, and help spur a recovery in the UK economy which plunged into its largest recession on record this week. “Even if the government offered free testing to every member of the population of a country of 66 million people every two weeks, that would be a fraction of what we're spending on all these other [coronavirus] measures,” Bilimoria, who is also the founder and chairman of Cobra Beer, told FN. The UK government has so far spent nearly £190bn to deal with repercussions of the coronavirus crisis, according to Treasury figures from July.
Brief: Saudi Arabia’s sovereign wealth fund has paid back a $10 billion bridge loan two months ahead of schedule, according to people familiar with the matter. The Public Investment Fund has fully repaid the loan, which was due in October, the people said, asking not to be identified because the information is private. It had signed the loan last year to raise funds while it waited for the proceeds of the sale of its nearly $70 billion stake in Saudi Basic Industries Corp., which closed in June. Saudi Arabia has been pushed into a deep budget deficit by the coronavirus pandemic and oil-price slump, forcing the kingdom to hike taxes and increase the government debt ceiling to 50% of economic output. The PIF is a key part of a plan by Crown Prince Mohammed bin Salman to transform the economy and wean it off a reliance on petroleum revenues. A group of 10 banks provided the loan: Bank of America Corp., BNP Paribas SA, Citigroup Inc., Credit Agricole SA, HSBC Holdings Plc, JPMorgan Chase & Co., Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc., Standard Chartered Plc and Sumitomo Mitsui Banking Corp. A spokesman for the PIF confirmed it had been repaid ahead of schedule, without providing further details.
Brief: U.S. corporate defined benefit plans face higher liabilities in the coming months as the impact of the COVID-19 pandemic becomes apparent, according to a report from Moody's. The report released Thursday is one of a series of in-depth sector reports from the credit agency and says rising pension liabilities will put more pressure on cash flow in sectors hardest hit by the pandemic, particularly in the airline and auto industries. With discount rates plummeting to what Moody's said is an all-time low of 2.26% as of July 31, the 50 companies with DB plans sampled by Moody's will see their adjusted debts rise by $120 billion. The report also said that while the CARES Act provides some short-term relief for corporations with DB plans, the help is limited. The Coronavirus Aid, Relief and Economic Security Act, signed by President Donald Trump on March 27, provides companies the option of a one-year holiday from making 2020 pension contributions, with interest accrued, until Jan. 1, 2021.
Brief: Private equity deals saw a late-July surge and whether this is part of a recovery or due to a backlog of deals that were impossible to close in April, May or June, EY Global is advising funds to make adjustments for the post-COVID world now to capitalize on the moment. To that end, Andres Saenz, private equity leader on EY Global’s markets leadership team, said the need to carry out a full-swing overhaul to step up digital transformation and rethink investments under the “new normal” are now part of nearly every conversation held with investors. Currently, there is US$2.6tn in “dry powder” private equity capital globally ready to release and a pool of private limited partners eager to the pull the trigger on investment as economies begin to exit the pandemic’s initial shock. Saenz was speaking Wednesday during Mexico’s annual private equity event, hosted virtually by Amexcap, which groups 120 member private equity funds with total committed resources of US$60bn, of which 54% has already been invested in projects and companies in sectors such as energy, infrastructure and real estate.
Brief: In the immediate wake of COVID-19, Global 2000 companies moved to slash funding for emerging technologies, such as automation, artificial intelligence (AI), blockchain, and 5G, according to new KPMG International research. However, many executives are optimistic emerging technology spending will likely increase in the next 12 months, as enterprises recognize COVID-19 creates a burning platform to accelerate digital transformation and stimulate long-term growth. Enterprise reboot, a new report from KPMG International and HFS Research, surveyed 900 technology executives* to explore the current and future state of emerging technologies and demonstrates a dramatic shift in how businesses are approaching emerging technology now versus just a few months ago before the onset of COVID-19. “This crisis isn’t affecting all industries equally, but for many of the industries facing crisis, managing the transition to a digital business model is imperative. However, doing so is made more complicated in a time where investments are critical, but cash must be preserved,” said Cliff Justice, KPMG global lead for Intelligent Automation and US lead for Digital Capabilities. Specifically, 59 percent of executives surveyed say that COVID-19 has created an impetus to accelerate their digital transformation initiatives, yet approximately four in 10 say they will halt investment in emerging technology altogether as a result of COVID-19.
Brief: Amid one of the greatest credit booms ever, a key player in the financial world has been conspicuously absent. Private equity firms that would usually jump at the chance to go on a debt-fueled buying spree are only just tip-toeing back to the market. In theory, business should be flourishing. Borrowing rates are close to record lows and investors are gorging on everything from rescue loans to shareholder payouts due in large part to historic support from the Federal Reserve. Banks are also ready to open the checkbooks after selling billions of dollars of debt for buyouts and acquisitions they feared they’d be stuck with as credit markets froze in March. Yet sponsors that slammed the brakes on deals, citing too much uncertainty on how long the coronavirus outbreak will last, have been sitting it out until now. “Two months ago, most of our clients who would have been thinking about acquisition financings, whether they’re corporate or sponsor, were tending to their own existing portfolios,” said John McAuley, head of North American leveraged finance at Citigroup Inc. “Now these companies and sponsors are looking at the opportunity set and being more proactive.”