Following the severe impact on its business from the global spread of the coronavirus pandemic, adidas has taken further steps to safeguard the company’s financial flexibility. The company received the approval of the German government for the participation of KfW, Germany’s state-owned development bank, in a syndicated revolving loan facility amounting to €3bn at customary market conditions to bridge this unprecedented situation.
The yet to be concluded syndicated loan – a financing instrument providing borrowers access to funding at a larger scale as well as flexibility in terms of drawdowns and repayments – comprises a loan commitment of €2.4bn from KfW and €600m in loan commitments from a consortium of the company’s partner banks. The consortium consists of UniCredit, Bank of America, Citibank, Deutsche Bank, HSBC, Mizuho Bank and Standard Chartered Bank.
One of the conditions of the syndicated loan is that adidas de facto suspends dividend payments for the duration of the facility. Furthermore, the Executive Board recently took the decision to stop the repurchasing of adidas shares as well as to forgo its short- and long-term bonus for the year 2020, which accounts for a total of 65% of the target annual compensation. The long-term bonus component for the next leadership levels within the company will also be forfeited for the current year. All of this is consistent with adidas’ approach to liquidity management in the current environment.
“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 CEO Kasper Rorsted. “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. But on top of this, access to additional liquidity is key to weather this crisis. We will repay any used portion of the loan, including interest and fees, as quickly as possible.”