Connect with us


Bankers call for ‘hybrid’ shares to plug COVID corporate capital gap



Bankers call for 'hybrid' shares to plug COVID corporate capital gap 1

Via Reuters

LONDON (Reuters) – European companies hit by COVID-19 could issue “hybrid” shares to plug a predicted capital gap of up to 600 billion euros ($723.48 billion) when government relief measures expire as vaccination programmes are rolled out, a report said on Tuesday.

The report compiled by consultants PwC and the Association for Financial Markets in Europe (AFME), which represents banks and other market participants, said economic recovery is under threat unless the capital gap is bridged.

It proposes a new European-Union-wide hybrid security like preferred shares, a form of stock that has features of ordinary shares and bonds, typically offering a priority in dividend payments but with no voting rights.

“This is where hybrid and equity markets can play a key role in supporting Europe’s recovery,” AFME CEO Adam Farkas said in a statement.

Despite relief from governments and the private sector since the start of the pandemic, 10% of European companies have cash reserves to only last six months, the report said.

The EU has already passed a package of “quick fix” measures to make it more attractive for companies to rebuild their finances by issuing shares on the stock market rather than the more common route of taking on debt such as bank loans.

But many mid-sized and SME corporates do not want to give up control of their business by issuing ordinary shares, the report said, and are willing to pay a premium not to dilute their voting rights.

“Hybrid instruments are ideally suited to address these needs,” it said.

Policymakers could also explore further use of dual class shares to address the control concerns of companies, as well as debt for equity swaps to reduce leverage, the report said.

(Reporting by Huw Jones; Editing by Catherine Evans)

Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Newsletters with Secrets & Analysis. Subscribe Now

Newsletters with Secrets & Analysis. Subscribe Now

Newsletters with Secrets & Analysis. Subscribe Now