Corporate debt, a crucial issue in emerging from the crisis

Corporate debt, a crucial issue in emerging from the crisis
Corporate debt, a crucial issue in emerging from the crisis

The clouds above the economy are dissipating a bit. With the acceleration of vaccination and the gradual reopening of most sectors, optimism is regaining economic and financial circles after a year and a half of waves of epidemics and repeated confinements. In this more favorable context, the financial situation of companies seems relatively preserved. According to a note from the Banque de France consulted by The gallery, corporate net debt fell in the first quarter by around 6 billion euros. Businesses’ cash flow has grown faster than their gross debt.

Over one year, the net debt has remained almost at the same level with an outstanding amount of 996 billion at the end of the first quarter of 2021 against 993 billion at the end of 2019 while the French economy has gone through a violent historic crisis. If the gross debt of companies soared during the year 2020 due in particular to loans guaranteed by the State (PGE), many companies have had “precautionary behavior” remind central bankers. The transition period and the lifting of aid should be a crucial step to avoid cascading bankruptcies for the moment not very visible in the statistics of insolvencies. Especially since the outstanding gross debt of companies has continued to climb to reach 1.892 billion euros at the end of last April against 1.682 billion euros at the end of 2019.

Sectoral disparities

The average of the figures unveiled by the hexagonal central bank obviously masks disparities according to the company. The grade does not provide detailed knowledge of the sectors. This point was also raised by economist Benoît Coeuré when submitting a report on aid in April.

“Unfortunately, there is little information on the financial situation of companies. There is a lack of information on cash flow at the moment. The statistics do not allow us to do this. We do not have a radar that would allow to have detailed knowledge for the public authorities “he explained during a press briefing.

If the various measures implemented (PGE, solidarity fund, short-time working, deferral of deadlines) have made it possible to preserve a large part of the companies, many sectors have gone through very long periods of confinement and restrictions. First and foremost, accommodation and catering have just passed seven months of virtual closure or limitations. Online foodservice sales have not made up for the losses and many restaurateurs will have to deal with a lot of cash flow pressures in the weeks to come. The tourism and event sectors could well undergo extensive restructuring in their sector.

The delicate end of “whatever the cost”

With the reopening of the economy, the executive wants to prepare the spirits for the end of “whatever the cost”. A few weeks ago, Prime Minister Jean Castex specified the modalities of the least support for partial unemployment by the State and Unedic in the months to come. Even if the head of government assured “qu’on will not disconnect the devices abruptly “ and “we will do custom made to take account of differences in the situation “, fears are growing in ruling circles.

> Read also: Disconnection of aid: the delicate end of “whatever the cost” is looming

Gregoire Normand

01 June 2021, 8:30 am

 
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