Foreign companies borrowed hundreds of millions of cheap government loans

Giant foreign companies have handed over billions of pounds to their wealthy investors after taking out cheap Covid loans backed by the UK taxpayer, a Mail on Sunday investigation has revealed.

Our investigation revealed more than £ 5 billion in payments to shareholders from companies that had borrowed substantial sums from the Bank of England.

Boots’ US owner gave billionaire Italian boss Stefano Pessina a windfall of nearly £ 50million just days after the street chemist withdrew £ 300million from the emergency loan scheme Bank Covid, which is underwritten by the UK government.

Walgreens Boots Alliance, based in Illinois in the United States, has paid out around £ 900million in total to investors since June. Boots CEO Mr. Pessina is the company’s largest shareholder.

The US owner of Boots gave his billionaire Italian boss Stefano Pessina (right) a windfall of nearly £ 50million just days after the street chemist withdrew £ 300million from the scheme. Bank’s Covid emergency loan, which is underwritten by the UK government

Other foreign companies that took out taxpayer-guaranteed loans in Britain before paying huge dividends to overseas shareholders include Spanish owner of Scottish Power Iberdrola, Japanese automaker Honda and US giant. of Baker Hughes Energy Services.

Critics last night criticized the “blatant abuse” of the Bank of England’s £ 85billion emergency program.

The Covid Corporate Financing Facility (CCFF) loans for large companies were launched last March by Chancellor Rishi Sunak and the Bank of England as part of measures to help large companies weather the pandemic.

Large companies “which make a significant contribution to the UK economy” were allowed to apply, even if their parent company was based abroad.

The Bank of England charged cheap interest rates – usually 0.5% or less, well below the normal cost of borrowing.

Depending on the terms of the loan, companies must repay the money after 12 months. However, if they go bankrupt – or are unable to repay – the taxpayer remains responsible for the debts.

Mr Sunak warned in May last year that the program was designed as a lifeline for businesses, so those who use it should not offer rich rewards to staff or investors. He even announced a “ban on dividend payments and cash bonuses, except with prior agreement.”

But experts said last night the rules were “full of loopholes,” which had been used by businesses. None of the Treasury restrictions appear to have been breached by the companies identified by The Mail on Sunday. All the companies defended their payments last night, saying they had done the right thing.

But Dame Margaret Hodge, former chair of the Public Accounts Committee, said: “While everyone wants them to help the economy through this crisis, no one can support a blatant abuse of these precious resources.”

Darren Jones, chairman of Parliament’s influential trade, energy and industrial strategy committee, said: “The Treasury should have included conditions on how public funds could be used.”

A source from Whitehall said: “It may be acceptable [in the scheme rules], but that’s not exactly in the spirit of the project. ‘

Covid Corporate Financing Facility (CCFF) Loans for Large Businesses were launched last March by Chancellor Rishi Sunak (pictured) and the Bank of England as part of measures to help large businesses weather the pandemic

Covid Corporate Financing Facility (CCFF) Loans for Large Businesses were launched last March by Chancellor Rishi Sunak (pictured) and the Bank of England as part of measures to help large businesses weather the pandemic

The revelations emerge amid growing controversy over the use of government grants to address the economic crisis caused by the Covid lockdowns.

Supermarkets, including Tesco, succumbed to public pressure last month to repay nearly £ 2 billion in tax breaks to businesses. More than £ 500million in leave money has been returned by companies.

When he launched the program ten months ago, Sunak said it was aimed at companies “which are fundamentally strong, but which have been affected by a short-term funding crisis.”

The rules were revised in May, but new restrictions prohibiting dividends only applied to loans due to be repaid after May 19 of this year. This has left many companies exempt.

Walgreens Boots Alliance blamed Boots for declining profits and said keeping the stores open cost money. He said dividends were paid in America “using US credit facilities” and that the move “reflects the long-term outlook for the company.”

A spokesperson said: “The boots have met strict eligibility criteria set by the Bank of England and have made the prudent decision to access a short-term commercial loan during a difficult time for the industry, which we intend to repay in May 2021. “

US oil giant Baker Hughes, whose UK branch has ties to Bermuda’s tax haven, has drawn a £ 600million loan from the Bank of England. It has allocated around $ 1bn in dividends to shareholders since the start of the crisis, worth around £ 730m.

Baker Hughes said he arranged the Bank of England loan in March “to secure liquidity at a time of financial market distress.”

A spokesperson added: “We believe this was a prudent move to ensure the continued smooth running of our business.” Scottish Power owner Iberdrola has borrowed £ 100million and has earmarked £ 2.3 billion in payments to shareholders in cash and shares since August.

Sources said Iberdrola is investing billions in the UK and is “fully compliant with the terms of the [loan] establishment’.

Honda said it took out the loan in March after UK car production was suspended “in line with the Bank of England’s stated target … [to] bridge the gap between coronavirus disruptions and cash flow ”.

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