19 Mar FOCUS ON BALANCE SHEETS STRENGTH, CASH FLOW AND LEVEL OF FIXED COSTS; THE DASH FOR CASH
It’s Day 3 of our COVID-19 insights summary and we hope you are finding it useful.
- Unprecedented global response to combat coronavirus epidemic
- Mortgage providers Fannie Mae and Freddie Mac, together with the US Department of Housing and Urban Development, will suspend mortgage foreclosures, their regulator, the Federal Housing Finance Agency said. The FHFA is also extending mortgage payment relief to customers who need it. See here.
- The European Central bank (ECB) has spent EUR 750 billion a bond-buying program overnight, dubbed the Pandemic Emergency Purchase Programme. The program will cover both sovereign bonds and corporate debt in a bid to shield the eurozone from the economic impact of the coronavirus. See here. (Subscriber access)
- The New Yorker continues to keeps things light (but insightful!) with their cartoons – see below.
Australian company news
- Property market starting to be impacted
- Australia’s property industry is the latest sector to be impacted by the coronavirus pandemic with the AFR quoting a UBS prediction that “house prices would drop by up to 20% in the worst case scenario’, while in a moderate scenario where infection rates peak in May, house prices will rise by 5%. Read more here. (Subscriber access)
- GPT has become the latest property company to withdraw 2020 earnings guidance this morning following Mirvac who withdrew guidance yesterday.
- Morgan Stanley says that listed REITS ‘are in better shape than they were before the GFC but still vulnerable if credit markets seize up’ with a lot of room in financing covenants. Read more here.
- Focus on balance sheets strength, cash flow and level of fixed costs
- We continue to see companies announcing changes / withdrawals of guidance. In the SMH, Liz Knight says “It is noteworthy that disclosure statements from companies are increasingly including information about their balance sheets: their cash positions and access to undrawn lines of credit.” Read here.
- Magellan’s Hamish Douglass says the economic impact could be fatal for some businesses especially those with high fixed costs, in his global portfolio update today.
- In The Australian, Jared Lynch mentions companies are “sandbagging their balance sheets as they brace for a recession” with shareholder adviser Dean Paatsh of Ownership Matters said it was “totally appropriate” for companies to withdraw guidance and move to preserve balance sheets given the widespread uncertainty. Read the full article here. (Subscriber access)
- The dash for cash
- In another day of market turbulence and government support announcements, there is heightened interest in access to debt facilities and cash, with equity raisings quickly becoming top priority for investment bankers, according to Street Talk. (Subscriber access)
- Today’s Chanticleer column looks at how valuation modelling is changing, saying “models that investors value companies could also become worthless”. It also questions “how do you work out the value of something that doesn’t just have zero earnings, but also zero revenue, or something close to that?”. Columnist James Thomson concludes “Cash, delivered in one form or another seems the only real solution”. (Subscriber access)
- Superannuation chiefs are balancing the need to be involved in coronavirus recovery efforts but will “likely resist any move to allow people to unlock their retirement savings early because it could force funds to sell assets at heavily discounted prices”. Read more in the AFR. (Subscriber access)
- Problem solving mode
- Joining the government to help support the economy, Australia’s big banks are negotiating a business rescue package, including underwriting loans for small and medium-sized business, to avoid job cuts. Read more here. (Subscriber access)
- Judo Bank, the first challenger bank for small and medium sized enterprises, announced it has signed a three-year, $350 million committed facility with global bank Citi which will allow the group to lift funding to small businesses struggling with coronavirus.
Our daily briefing is not meant to be a summary of media coverage but rather, insights that may be helpful in understanding how organisations are communicating with stakeholders in a time of crisis – and what comes next. Sign up via email.