Big Businesses Tap $124B From Credit Lines To Stay Afloat

Over 130 businesses across Europe, North America and South America have drawn cash from at least $124.1 billion in credit lines to stay afloat during the coronavirus crisis.  

The figure for funds borrowed is probably much more than disclosed, The Financial Times reported on Wednesday (March 25), citing its analysis of public information as well as sources. Public firms can keep drawdowns close to the vest in the short term, and private companies generally don’t have to reveal that information at all. 

Albertsons supermarkets, headquartered in Boise, Idaho, had been planning to file an initial public offering on March 6, but instead, chief executive officer Vivek Sankaran asked Bank of America for money. By March 18, it took out $2 billion in credit and could go back for more as the pandemic continues and uncertainty grows. 

The supermarket’s executives previously had been putting efforts into a New York Stock Exchange listing.

The credit market is tight, however, and not every business seeking credit will be able to get it — and others may not get as much as they need. 

“The $10 trillion U.S. corporate bond market, where investors had eagerly lapped up debt offerings from even the shakiest companies, is now reserved for the most well-known and financially sound,” according to the report. 

In addition, the short-term commercial paper market needed emergency assistance from the Federal Reserve.

Norwegian Cruise Line and Hilton Worldwide were among the first businesses to tap credit lines. Both were hit especially hard as travelers canceled vacations, but just about every business in every industry followed suit. 

Ford tapped $15.4 billion in credit and shuttered manufacturing; Anheuser-Busch InBev borrowed $9 billion; TJ Maxx and Kohl’s locked their doors and borrowed $1 billion.

“The economy is really suffering. It has hit an iceberg and nobody knows, frankly, how long this will last,” said Carlos Hernandez, the executive chair of global investment banking at JPMorgan Chase. “It’s not unreasonable to assume that more businesses will draw their lines.”

A Federal Reserve report that measured the U.S. economy since the pandemic took hold predicts a grim economic future.