56 Business The EconomistApril 4th 2020
2 France and others, it has furloughed work-
ers through state schemes. Car companies
have 4-10 weeks of cash on hand, maybe
double that if they tap credit lines, accord-
ing to Jefferies, a bank. That may not be
enough to ride out the crisis unaided.
The financial sector is the other tradi-
tional, if less beloved, candidate for state
support. Insurers’ liability to covid-19 is,
for instance, still unclear. Politicians in
America are urging insurance firms to in-
demnify holders of policies protecting
against business interruptions. The com-
panies say these do not cover pandemics,
and claim they could be on the hook for
losses nearing $400bn a month if forced to
do so. States including Ohio and Massa-
chusetts are mulling bills that would com-
pel payouts (see Finance section). These
would have to be accompanied by a rescue
package. At least banks look more solid,
thanks to regulations enacted in the wake
of the financial meltdown in 2007-09. For
once they may be part of the solution, not
the problem: governments are using them
as a conduit for state-guaranteed loans.
Support which banks, and any other
business, will readily accept is coming in
the form of relaxed regulations. Lenders
are being offered capital relief in Europe
and America. Countries from France to
South Korea have banned investors from
betting on share-price falls, to many a ceo’s
delight. Some environmental regulations
in America have been waived. European
airlines get to keep valuable slots at air-
ports even though they are not using them
as required. Steven Mnuchin, America’s
treasury secretary, has said the aid is predi-
cated on three months of stoppages. It is
anyone’s guess if that will be enough.Much of the government largesse will
be spread among millions of small busi-
nesses. Shuttered pizza joints, gyms, flo-
rists and the like are facing months of lost
revenue. Few voters object to public money
being used to pay laid-off or furloughed
workers directly, as in Europe, or, as in
America, to provide grants for firms that
keep staff (see Schumpeter).
In fact, programmes which authorities
have sold as a way to save mom-and-pop
shops may also help big business. In Ger-
many Adidas, a giant maker of sports gear,
tried to use a measure designed to tide over
small firms to suspend rental payments for
some of its shops (it reversed course after
the news leaked). American hotel chains
won the right to treat each location as a sep-
arate business—and with it access to bail-
outs designed for firms with fewer than
500 employees.
Many stronger firms would prefer a
private-sector rescuer. Those with solid
balance-sheets in Europe and America
raised $316bn from investment-grade
bonds in March, according to Dealogic, a
data provider. Although some racier blue-
chip firms must pay high coupons, for
many yields remain reasonable (see chart).
Some companies with iffier prospects
can get their hands on cash, too. Carnival, a
cruise-line operator whose share price is
down by 83% this year, is raising $4bn
through a sale of bonds (in part by mortgag-
ing its ships) as well as fresh equity. Mar-
kets are charging a hefty price for this sup-
port. So long as they remain willing to
shore up corporations on the brink, tax-
payers may be spared big payouts—and
governments, blushes for helping out un-
loved big business. 7Bail bondsSource: Bloomberg *For company senior debt at March 31stCorporate-bond issuance,Q1 2020, selected companies
Issuer Amount,$bn Coupon,% Year of maturity
AT&T 3.0 4.0 2049 246.6
ExxonMobil 2.8 4.3 2050
HCA Healthcare 2.7 3.5 2030 313.8
Verizon Communications 2.4 3.6 2060 137.5
Intel 2.3 4.8 2050
AT&T 2.2 2.9 Perpetual/callable 246.6
United Technologies 2.0 2.2 2025
Gazprom 2.0 3.3 2030 271.2
Energy Transfer 2.0 5.0 2050 186.8
ExxonMobil 2.0 3.5 2030
Nvidia 2.0 3.5 2050Worldwide non-financial corporate-bond issuance,January-March
Total issuance,$trn Average coupon,% Average maturity,years
2019
20200.9
1.25.7
4.82.77
2.5983.362.742.283.3
100.0Credit-default
swap spread*
Basis pointsT
he coronaviruslaid many of Boeing’s
airline customers low—literally, for
many have suspended flights. Fears about
the giant’s fate, already uncertain because
of the year-long grounding of its best-sell-
ing 737 max jet after two fatal crashes, be-
came so rife that last month Goldman
Sachs, a bank, felt compelled to stress that
it “will remain a going concern”. The com-
pany itself insists likewise. It is probably
right—the question is not whether it will
survive but how.
Boeing has a safety net. A third of rev-
enues in 2019 came from its defence arm,
which, with its services division, will bring
in $5bn in profits this year, reckons Bern-
stein, a research firm. It has cash on its bal-
ance-sheet, the balance of a $14bn credit li-
ne and has suspended its dividend. Dave
Calhoun, Boeing’s new boss, says that the
firm has $15bn in liquidity.
Jefferies, a bank, estimates that the
company burns through $4.3bn of cash a
month with a complete suspension of de-
liveries. So it may need government help if
the crisis drags out. Lucky, then, that Con-
gress folded its plea for assistance for
American aviation into a $2trn stimulus
package. This includes $25bn for carriers
and $17bn for firms “critical to maintaining
national security” (ie, Boeing). The terms
are unclear and talks ongoing. But Steve
Mnuchin, the treasury secretary, has hint-
ed that help would come with strings—in-
cluding an equity stake for the state.
Boeing is unwilling to entertain this (for
now). It may prefer to try to tap $454bn set
aside in the stimulus for loans and guaran-
tees to big firms, which would not involve
giving up equity. Mr Calhoun says his com-
pany can raise money in the market. But
the terms would be onerous. Despite recent
improvements, its ten-year bonds trade be-
low par and the cost of insuring its debt
against default remains high.
Boeing hopes that business will bounce
back quickly; it has been reluctant to fur-
lough workers, notes Ken Herbert of Ca-
naccord Genuity, a bank. It intends to re-
start making the 737 max in May (slowly at
first). Goldman Sachs reckons that even if
it delivers only half the planes planned for
this year it will have the liquidity to cover a
“deeply negative” cashflow. But airlines
may not return to normal service for
months, depressing sales. Mr Calhoun may
have to pick between a bitter market rescue
and an unsavoury government one. 7The aerospace giant ponders its
bail-out optionsBoeingUp in the air