This isn't the reversal

[allstock]

Expect SPX to be back at the previous low

Also be mindful, companies that take monetary assistance from the 2.2trln covid-19 aid cannot pay dividends for term of the loan. This also includes any stock buyback programs.

 

[Aerides]

ya don't say

 

[Fermion]

Be sure to let us know the date of the real reversal...preferably a couple of days ahead of time if it isn't too much trouble?

 

[Dtail]

Well if the gov't is potentially preparing another round of assistance in 3 months, won't the markets become more stabilized until they stop helping/propping up the market?

 

[DrRoy]

Be sure to let us know the date of the real reversal...preferably a couple of days ahead of time if it isn't too much trouble?

+1

 

[OldShooter]

Better yet, please post a picture of the entrails of the sheep so we can verify your conclusion.

 

[jazz4cash]

Expect SPX to be back at the previous low

Also be mindful, companies that take monetary assistance from the 2.2trln covid-19 aid cannot pay dividends for term of the loan. This also includes any stock buyback programs.

No dividends? I can’t substantiate that anywhere. Got a reference?

 

[Toocold]

I think cutting dividends was one of the demands by Warren but it never got into the final bill. They probably realized that too many retirees require that income to live.

https://www.cnn.com/2020/03/18/business/elizabeth-warren-bailout-buyback-ban/index.html

 

[pb4uski]

No dividends? I can’t substantiate that anywhere. Got a reference?

I recall that being part of the bill on another thread. I can see the logic... if you need/accept aid then pay US back first, then shareholders.

Businesses are restricted from paying dividends and making other capital distributions with respect to their common stock, and businesses and their affiliates are prohibited from buying back public stock (unless contractually obligated prior to the enactment of the CARES Act), until one year after the loan is repaid.

https://www.skadden.com/insights/publications/2020/03/cares-act-provides-much-needed-stimulus

 

[VanWinkle]

I recall that being part of the bill on another thread. I can see the logic... if you need/accept aid then pay US back first, then shareholders.



https://www.skadden.com/insights/publications/2020/03/cares-act-provides-much-needed-stimulus

Corporations borrow money all the time, and the lenders don't require the corporation to stop paying the owners their dividends. I can't see the logic in this. I agree on buy backs.

 

[pb4uski]

Corporations borrow money all the time, and the lenders don't require the corporation to stop paying the owners their dividends. I can't see the logic in this. I agree on buy backs.

Loan covenants limiting the payment of common stock dividends and stock buy-backs are not uncommon. And besides, those corporations who are unwilling to accept that constraint are free to try to borrow money in the open market without such constraints.

In its simplest formulation, a restricted payments covenant in a loan agreement limits the borrower's (or its parent company's) ability to make payments in the nature of dividends, distributions, equity redemptions and repurchases from its equity holders. The provision ensures that equity holders are not paid before the loans are repaid, apart from limited exceptions.

 

[VanWinkle]

And those corporations who are unwilling to accept that constraint are free to borrow money in the open market.... loan covenants limiting the payment of common stock dividends and stock buy-backs are not uncommon.

So because there is a choice, it makes the constraint logical? Seems a little contrite to me.

 

[UnrealizedPotential]

I would think that the first thing a corporation would do if they find themselves in a tough position is to cut or eliminate the dividend. I do not think this is an unreasonable or unexpected thing to have happen. If a corporation needs to ask for aid, I think it would be one of the requirements to cut or eliminate the dividend .

Lenders need to see how serious the corporations are about cutting expenses where possible before asking for aid. In addition to this, the corporations will probably need to furlough their workers. Times are tough right now for a lot of companies and with no revenue coming in, or at least very little, corporations want a job waiting on the other side of this downturn for their management and associates. Just my opinion.

 

[pb4uski]

So because there is a choice, it makes the constraint logical? Seems a little contrite to me.

See my subsequent edits... such constraint are very common in business lending.

You want the money then here are the terms... if you don't like the terms you are not compelled to borrow the money... what's the matter with that?

 

[HadEnuff]

I'm sure this is a naive point of view, but I would think the primary function of the money is to keep people on payroll, not to cut payroll in order to maintain profitability and pay dividends.
At least that was the lip service prior to the passing of the bill.

 

[Markola]

I'm sure this is a naive point of view, but I would think the primary function of the money is to keep people on payroll, not to cut payroll in order to maintain profitability and pay dividends.
At least that was the lip service prior to the passing of the bill.

+1. The point of the government cash injection is that it go to keeping employees on payrolls, not rewarding investors or giving executives bonuses. With no constraints, we get Occupy Wall Street and the Tea Party again.

 

[harley]

Except you can't gather in the streets to protest this one.

 

[OldShooter]

From the horse's mouth (https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf):

(2) LOANS AND LOAN GUARANTEES .—The Secretary may
enter into agreements to make loans or loan guarantees to
1 or more eligible businesses under paragraphs (1), (2) and
(3) of subsection (b) if the Secretary determines that, in the
Secretary’s discretion—
(A) the applicant is an eligible business for which
credit is not reasonably available at the time of the transaction;
(B) the intended obligation by the applicant is prudently incurred;
(C) the loan or loan guarantee is sufficiently secured
or is made at a rate that—
(i) reflects the risk of the loan or loan guarantee;
and
(ii) is to the extent practicable, not less than an
interest rate based on market conditions for comparable obligations prevalent prior to the outbreak of
the coronavirus disease 2019 (COVID–19);
(D) the duration of the loan or loan guarantee is as
short as practicable and in any case not longer than 5
years;
(E) the agreement provides that, until the date 12
months after the date the loan or loan guarantee is no
longer outstanding, neither the eligible business nor any
affiliate of the eligible business may purchase an equity
security that is listed on a national securities exchange
of the eligible business or any parent company of the
eligible business, except to the extent required under a
contractual obligation in effect as of the date of enactment
of this Act;
(F) the agreement provides that, until the date 12
months after the date the loan or loan guarantee is no
longer outstanding, the eligible business shall not pay dividends or make other capital distributions with respect to
the common stock of the eligible business;
(G) the agreement provides that, until September 30,
2020, the eligible business shall maintain its employment
levels as of March 24, 2020, to the extent practicable,
and in any case shall not reduce its employment levels
by more than 10 percent from the levels on such date;​

 

[harley]

JACK CADE. I thank you, good people:– there shall be no money; all shall eat and drink on my score; and I will apparel them all in one livery, that they may agree like brothers, and worship me their lord.

DICK. The first thing we do, let's kill all the lawyers.

 

[Gumby]

JACK CADE. I thank you, good people:– there shall be no money; all shall eat and drink on my score; and I will apparel them all in one livery, that they may agree like brothers, and worship me their lord.

DICK. The first thing we do, let's kill all the lawyers.

HAMLET: By heaven, I’ll make a ghost of him that lets me.

 

[NW-Bound]

I think cutting dividends was one of the demands by Warren but it never got into the final bill. They probably realized that too many retirees require that income to live...

If this does not convert retirees into total return investors, I don't know what would.


OK, bad joke aside, do you think utility companies will have to borrow any money? They are among the big dividend payers.

And in recent years, even Intel and Microsoft also pay dividends. Do they need to borrow any money?