LONDON (Reuters) - British businesses will face curbs on dividends and executive pay if they get more than 50 million pounds ($61 million) of government-backed coronavirus loans or borrow from the Bank of England for more than a year.
The government said its Coronavirus Large Business Interruption Loan Scheme (CLBILS) would expand its maximum loan size to 200 million pounds from 50 million pounds.
But businesses that take advantage of the larger loans will be unable to pay dividends, undertake share buybacks or award senior managers pay rises or increased bonuses.
Similar rules will also apply to firms borrowing for over a year from the BoE’s Covid Corporate Financing Facility, which buys short-term debt known as commercial paper from companies that had an investment-grade credit rating before the crisis.
Unlike in the United States and France, British government aid to firms hurt by COVID-19 has had few strings attached, though the BoE did stop major banks from paying dividends in March.
The BoE finance scheme has had strong take-up, with the central bank buying 18.8 billion pounds of commercial paper, from 55 large companies, and has authorised a further 38.8 billion pounds of purchases if needed.
From June 4 the BoE will publish details of all firms using the programme.
The finance ministry lending scheme - which offers an 80% loan guarantee for bank lending to large companies that do not necessarily meet the BoE’s credit standards - has only approved 590 million pounds of lending so far.
Fewer than one in five companies that have applied to banks for the loans have been successful.
By contrast, a 100% government-backed lending scheme for small businesses has lent more than 14 billion pounds in two weeks.
Additional reporting by Kate Holton; Editing by William Schomberg and Susan Fenton
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