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Official credit monitoring of Covid loans as the pandemic cloud continues

Authorities are wary of the risk of companies defaulting on state-sponsored Covid loans in the next phase of the pandemic, according to the head of state, which oversees part of the portfolio offered under the emergency scheme.

Charles Donald, Head of UK Government Investment, said he had “played a role in monitoring large exposures for the Treasury” in the government’s loan portfolio until its final maturity in March 2022.

This included an analysis of “pressures that could affect expected repayment schedules.” That’s what I call a credit watch, “he said.

“We are watching it very carefully,” he added. “Who knows what will happen next with respect to the pressure of the next phase of the pandemic in various sectors?”

According to Donald, managing the Covid loan portfolio focused on two emergency schemes: the Bank of England’s Covid Corporate Finance Facility and the Coronavirus Large Business Suspension Loan Scheme with up to 80% state guarantee. That is.

UKGI also supported the Treasury’s “Project Birch” program, which invests in key companies operating pandemic-affected businesses.

Ultimately, only Selsa, a steel maker based in southern Wales, benefited. However, Donald said this did not reflect the number of inquiries from companies seeking government support. In almost all other cases, he said, a private sector solution was found.

Former Credit Suisse banker Donald, who became CEO after a pandemic in March 2020, confirmed that the plan had ended. “There’s a huge amount of work going on that isn’t always visible. Often you’ll find other solutions.”

UKGI’s pre-pandemic broader role is to manage the £ 945 billion portfolio of fully and partially owned state-owned companies such as NatWest, Channel 4, Post Office, Land Registry and Urenco, a nuclear fuel supplier. was.

It provides a level of knowledge in the private sector, including bringing in outside experts to advise and implement policies for the government sector.

Donald has indicated that he expects further sales of NatWest shares by the UK government this year © Jason Alden / Bloomberg

In an extensive interview with the Financial Times, Donald said he hopes to sell more NatWest shares this year given the strength of the stock market and the removal of dividend restraints.

May, UKGI sold out £ 1.1bn for NatWest shares, second disposal in two months. This reduced the government’s stake to less than 55% 13 years after the bank, then known as the Royal Bank of Scotland, was nationalized and placed under state control during the financial crisis. ..

Asked about the further sale of NatWest shares, he said: After regaining some calm, we have made some progress this year. Our duty is to ensure that we are constantly monitoring opportunities to sell based on monetary value. “

“I feel a very healthy market,” he said, and the government’s removal of “guardrails” that limit dividend payments by British banks was also “very positive” for potential returns. Said that.

UKGI plans to complete the sale of other assets once owned by Bradford & Bingley and Northern Rock under the UK asset resolution scheme during the financial crisis.

The UK government has been seen by some in the business community to be more interventionist, partly after accumulating debt and equity interests to support a pandemic business.

This week, the Future Fund: Breakthrough was launched, investing up to £ 375m in UK startups. This shows that the government is keen to expand the state’s exposure to promising private companies.

“The pandemic clearly created a unique and difficult situation that needed help,” Donald said. “There is a partial timing match for many of these things … So I’m definitely busy.”

Donald said UKGI has also set up a unit to better understand the government’s contingent debt with the goal of reducing its exposure.

“As a result, these contingent debts are not always contained, but at least better understood, and ultimately we would expect and expect taxpayers to have less significant exposure. [they] It may be now. “

Official credit monitoring of Covid loans as the pandemic cloud continues

Source link Official credit monitoring of Covid loans as the pandemic cloud continues

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