Easyjet seeks state loans – but pays Stelios £60m
thetimes.co.uk
thetimes.co.uk
- the company is legally required to pay the dividend
- the company is looking for a 'commercial loan'
I don't understand the latter part. I read 'commercial loan' as a loan on commercial terms, which would include pricing in the risk of default etc. If that's what they mean, then why does the government need to provide the loan? Why not borrow from a commercial bank or issue bonds in the normal way?
If the answer is 'no one will lend', then the rate the government charges should be very high indeed (infinite?). If the answer is 'too expensive', then the government's price should be too expensive, too.
What am I missing?
That's a new one to me, and I've been following the financial press for decades.
It could mean that the dividend was previously decided at a board meeting and announced to shareholders already, and they want to follow through to avoid a securities investigation.
- you will receive the dividend
- you will have no other financial upside/downside from easyjet's performance
If the dividend were to be cancelled, then this would transfer wealth from you (a past shareholder) to current easyJet shareholders.
Rules changing after you have made a trade isn't how financial markets are meant to work, because it reduces incentive structures.
I'm not saying what should happen in this case. Just pointing out that cancelling a dividend for shares that have already gone ex-dividend seems like it would require a lot of work to make sure that the money comes from current shareholders, and not past ones.