With an aim to safeguard the company's financial flexibility and given what adidas calls as "severe impact on its business from the global spread of the coronavirus pandemic" the sportswear giant managed to secure syndicated revolving loan facility amounting to 3.0 billion euros.

Yesterday the company received the approval of the German government for the participation of KfW, Germany’s state-owned development bank, in the financing instrument which will provide access to funding at larger scale as well as flexibility in terms of drawdowns and repayments. The total loan includes a commitment of 2.4 billion euros from KfW and 600 million euros in loan commitments from a consortium of the company’s partner banks. The consortium consists of UniCredit, Bank of America, Citibank, Deutsche Bank, HSBC, Mizuho Bank and Standard Chartered Bank. 

One of the conditions of the syndicated loan is that adidas suspends dividend payments for the duration of the facility. Furthermore, adidas Executive Board recently took the decision to stop the repurchasing of adidas shares and long-term bonus for the year 2020, which accounts for a total of 65% of the target annual compensation.

“The current situation poses a serious challenge even for healthy companies. We thank the German government for its fast and comprehensive course of action in response to this unprecedented global crisis”, commented adidas CEO Kasper Rorsted, adding: “We are doing our utmost to protect the long-term well-being of adidas, our 60 000 employees and our partners, and are implementing numerous measures. These measures include the establishment of strict cost and working capital controls, the reduction of management compensation, the stop of the share buyback program as well as the suspension of dividend payments. But on top of this, access to additional liquidity is key to weather this crisis. We will repay any used portion of the loan, including interest and fees, as quickly as possible”.

In addition to the significant revenue and profit decline the company has been experiencing in China since the end of January as well as in Japan and South Korea from late February onwards, adidas has also seen a severe impact on its revenues and cash generation in most other parts of the world since mid-March. Following the rapid global spread of the coronavirus almost all own stores and partner-operated stores across Europe, North America, Latin America, Emerging Markets, Russia/CIS and large parts of Asia-Pacific have been temporarily closed for the last four weeks. As a result, the wholesale and physical retail activities in these markets, which usually account for 60% of the company’s business, came to a complete standstill. 

In light of those severe consequences, the company has reached an agreement with the local works councils to reduce working hours for several employee groups in Germany. Among other things, this agreement provides for paid leave, a reduction in overtime and also short-time working for 1 200 employees. adidas confirmed that additional measures of this kind are being explored in close consultation with the relevant stakeholder groups.