France comes to the rescue of Europcar, becomes guarantor of 223 million euros loan

The Europe’s popular car rental company, whose net debt increased by 32% last year and above 3.4 billion euros, has lost 60% of its share price in the last month on the stock exchange.

The French state has intervened as guarantor of a line of loans worth 225 million euros requested by the car rental company Europcar to maintain the continuity of its business, greatly affected by the collapse of tourism and therefore car rental services caused by the impact of the coronavirus.

Throughout last week, Europcar held advanced negotiations with several financial entities and in order to capture a line of credit of at least 223 million euros, according to both Le Monde (French newspaper) and the Reuters news agency.

The rent a car firm has seen its value on the stock market precipitate in the last month due to effect of the pandemic in the tourism and travel sector, the main source of income for the group led by executive Caroline Parot.

The company is currently trading on the Euronext in Paris at just over 1.7 euros, 60% less compared to the middle of last month and 80% less if the 12 previous months are taken as a reference, when the company’s share stood at 7.5 euros.

The situation caused by the coronavirus has become a headache for the French multinational, which provides employment to some 12,000 workers in the world and which in Europe is one of the leading car rental companies.

At the beginning of the financial year, the financial markets detected the interest of the group’s main shareholder, the investment firm Eurazeo, to divest itself of its 29.9% stake in the capital of a brand that has tried to make the leap forward by increasing its volume in recent years.

Europcar has increased its size with purchases such as the 562 million euros acquisition in 2016 of the Spanish low-cost rent-a-car Goldcar, and through acquisitions based on concepts such as new mobility which at the moment only generate losses.

The new mobility business reported a loss of 22.5 million to the company in 2018, and those losses increased to 32 million last year.

The net debt recorded by the multinational at December 31 of last year stood at 3,403 million euros, which represents a strong increase of 32% compared to the 2,576 million by December 31, 2018.

Europcar, which registered a net profit of 29.8 million euros last year, increased its turnover by 3% last year, to 3,022 million euros.

Author: Nabeel K

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