German sportswear brand Adidas AG said that it has received approval for a syndicated loan facility worth 3 billion euros ($3.7 billion) as “further steps to safeguard the company’s financial flexibility” after the coronavirus has had a severe impact on its business.
On Tuesday, the group received approval from the German government for the participation of KfW, the country’s state-owned development bank, in a syndicated revolving loan facility amounting to 3 billion euros. That involves a loan commitment of 2.4 billion euros from KfW and 600 million euros in loan commitments from a consortium of the company’s partner banks that includes UniCredit, Bank of America, Citibank and Deutsche Bank, among others.
Adidas, based in Herzogenaurach, Germany, said it has been posting significant revenue and profit declines in China since the end of January, and in Japan and South Korea since February. The group noted a severe impact on its sales and cash generation in most of the rest the world since mid-March.
“Following the rapid global spread of the coronavirus almost all owned and partner-operated stores across Europe, North America, Latin America, emerging markets, Russia/CIS and large parts of Asia-Pacific have been temporarily closed for the last four weeks,” the company said in a statement. “As a result, the wholesale and physical retail activities in these markets, which usually account for 60% of the company’s business, came to a complete standstill.”
“The current situation poses a serious challenge even for healthy companies. We thank the German government for its fast and comprehensive course of action in response to this unprecedented global crisis,” said Adidas chief executive officer Kasper Rorsted in the statement. “We are doing our utmost to protect the long-term well-being of Adidas, our 60,000 employees and our partners, and are implementing numerous measures.
“These measures include the establishment of strict cost and working capital controls, the reduction of management compensation, the stop of the share buyback program as well as the suspension of dividend payments,” continued Rorsted. “But on top of this, access to additional liquidity is key to weathering this crisis. We will repay any used portion of the loan, including interest and fees, as quickly as possible.”
A condition of the syndicated loan is that Adidas suspends dividend payments while the facility lasts, which can be through July 2021.
Adidas’ board of directors recently decided to forgo its short- and long-term bonus for this year, which makes up 65% of the target annual compensation. The long-term bonus component for the next leadership level is also to be forfeited in 2020.
Some employees’ working hours are being reduced in Germany, and the agreement with local works councils includes paid leave and a reduction in overtime.
Adidas said the development of the COVID-19 pandemic and its impact on the group cannot currently be forecast, and that therefore the company cannot give an outlook for full-year 2020 that takes into account the health crisis’ affect.
Adidas has moved the date of the release of its first-quarter results forward to April 27, from May 8.
In 2019, the company’s fifth consecutive year of growth, Adidas’ net profit rose 12% to 1.91 billion euros on sales that gained 6% to 21.91 billion euros.
This article first appeared on WWD.