Coronavirus Large Business Interruption Loan Scheme

(Limited Text - Ministerial Extracts only)

Monday 15th June 2020 Written Statements

[The Secretary of State for Business, Energy and Industrial Strategy (Alok Sharma)]

I am tabling this statement for the benefit of hon. and right hon. Members to bring to their attention the details of changes we have made to the coronavirus large business interruption loan scheme (CLBILS).

CLBILS is facilitated by the Government-owned British Business Bank and delivered through its delivery partners. Lenders have until now offered loans from £30,000 up to £50 million to support viable businesses with a turnover of £45 million and above that are affected by the coronavirus outbreak. It is designed to ensure businesses that have been adversely impacted by the coronavirus outbreak can access the finance they need, even if they are too large to access CBILS but unable to access the Bank of England’s covid corporate financing facility. There is no limit on the number and aggregate value of loans that can be made under the scheme.

Despite this, some businesses have not been able to address cashflow issues due to caps on maximum loan sizes permissible under the scheme. Businesses with turnover up to £250 million have been unable to borrow more than £25 million, and no business, regardless of turnover, has been permitted to borrow more than £50 million. On 26 May, we therefore made the following changes to the scheme:

an increase in the maximum loan size available under CLBILS: loans are now available from £50,000 to £200 million;

the replacement of the £25 million loan size cap for firms with a turnover of up to £250 million with a new cap on maximum loan size at 25% of turnover for all borrowers through CLBILS; and

tighter restrictions on company activities for the duration of the facility for loans above £50 million: borrowers cannot make any dividend payments other than those that have already been declared, may not make any share buybacks on dividend payments, may not pay any cash bonuses, or award any pay rises to senior management (including the board) except where they were declared before the CLBILS loan was taken out, are in keeping with similar payments made in the preceding 12 months, and do not have a material negative impact on the borrower’s ability to repay the loan.

for loans up to £50 million, the existing restrictions on dividends continue to apply: only dividends declared before the CLBILS loan was taken out, are in keeping with those made in the previous 12 months, and which would not have a material negative impact on the ability to repay the loan are permitted

Further detailed technical changes to the scheme, including the approach to restructuring events and new provisions on seniority of CLBILS facilities, are detailed on the British Business Bank’s website.

There remains no limit on the number or aggregate value of loans issued under CLBILS. The Government remain subject to a statutory contingent liability arising from CLBILS, and I will be laying a revised departmental minute today containing a description of the liability undertaken.

[HCWS292]