US companies rush to hoard cash

From Exxon Mobil Corp. to Royal Caribbean Cruises Ltd., companies rushed to borrow more money and boost their cash coffers on Tuesday, as the market turmoil fueled by a plunge in oil prices and the global coronavirus outbreak raised the prospect of an economic downturn.
“It’s companies loading up on cash when you can get it. They are effectively building up that war chest,” said Jeremy Swan, managing principal at accounting and tax advisory firm CohnReznick LLP.
Royal Caribbean said on Tuesday it increased its credit capacity by US$550 million to boost liquidity. The company’s stock plunged this month, amid concerns that the coronavirus outbreak would curtail travel.
“These are extraordinary times and we are taking these steps to manage the company prudently and conservatively,” Royal Caribbean Cruises chairman and chief executive Richard Fain said in a statement.
Exxon, which has one of the corporate world’s strongest balance sheets, filed paperwork on Tuesday for an unspecified board offering for what it called general corporate purposes, as the oil major grapples with the collapse in Brent crude LCOc1 prices.
Oreo maker Mondelez International Inc. on Monday announced a US$2.5 billion credit facility, in addition to a similar agreement worth US$1.5 billion agreed less than two weeks ago.
United Airlines Holdings Inc. also said on Tuesday it had raised an extra US$2 billion in financing while slashing its 2020 capital expenditures by more than a third.
“We also believe we have good options to raise additional liquidity in the weeks to come, if needed,” United president Scott Kirby said.
Other companies chose not to raise new funds yet touted their financial strength to calm investors. In an investor presentation on Tuesday, American Airlines Group Inc. flagged more than US$7.3 billion in cash and unused bank lending in reserve.
“American Airlines has more liquidity than any other airline in the world, which is exactly where we want to be in an environment like this and exactly why indeed we’ve held so much for so long,” American Airlines chairman and CEO Doug Parker said.
Debt-laden companies in service sectors hit by reduced tourism and discretionary spending, such as airlines, cruise lines, movie theaters, gaming companies and hotel chains, are particularly vulnerable, according to Fitch Ratings.
“What we’ve seen in this market is that stability today isn’t necessarily stability tomorrow,” Swan said. Reuters
– Contact us at [email protected]
CG
-
Epidemic and 40-year-high inflation stalk HK migrants in UK Mark O'Neill
The website of the Trinity Church in Sutton, southwest London, is written in English and traditional Chinese – 歡迎香港人, Welcome Hong Kong people. “The middle of a pandemic is not an easy time to arrive
-
The privilege of shorter quarantine Ben Kwok
The nightmare of staying in a hotel for three full weeks might hopefully be over. Yesterday the National Health Commission announced to shorten the hotel quarantine period for people arriving in the
-
3D maps enhance disaster prevention and rescue Dr. Winnie Tang
Abnormal and even extreme weather has become more frequent. The Observatory forecasts that tropical cyclone incidence and total rainfall this year will be "normal to high". To be well-prepared, the
-
Ignoble ease Neville Sarony
There is no shortage of commentators, both lawyers and lay people, who feel entitled to criticize Hong Kong’s legal community for what these observers assert is a failure to stand up for the liberal
-
An imminent private housing supply chasm and its solutions Ryan Ip Man-ki, Jason Leung Yeuk Ho
As the 5th wave of Covid-19 gradually subsides, waves of new private housing projects are now under the spotlight. Intensifying competition among developers became the talk of the town after a