Government may step in to rescue Hema: report

Hema store in Amsterdam
Hema store in AmsterdamNL TimesNL Times

The Dutch government is involved in discussions to rescue debt-ridden retail chain Hema. The Ministry of Economic Affairs and Climate hired investment bank Lazard to investigate what role the government can play to keep Hema standing, for example in the form of loan guarantees, Financieele Dagblad reported based on information from multiple sources.

"The Hague has been keeping a close eye on the situation around Hema for months because it is a large employer," once source said to the newspaper, adding that the livability of the city centers also plays a role. Hema employs 9,500 people in the Netherlands and has 550 stores across the  country. 

Hema has been struggling with high debts, currently over 750 million euros, for years and that has only been exacerbated by the coronavirus crisis. In March CEO Tjeerd Jegen said that the survival of the chain is in jeopardy. The chain is also in discussion with its creditors about debt relief. A group of creditors, who loaned Hema 600 million euros, is willing to scrap half the debt in exchange for shares. If that happens billionaire Marcel Boekhoorn, who bought Hema with great fanfare in 2018, will lose the company.

But the discussions between Hema and its creditors are difficult, sources said to FD. This is partly because the current rescue plan would mean that a consortium of three banks - ABN Amro, ING, and Credit Issue - would have to increase their revolving credit of 80 million euros to Hema. And they are reluctant to lend more money to an already debt-laden company in an already difficult retail climate. 

The government is therefore considering stepping in, FD wrote. But politically, this is a complicated step. Unlike KLM for example, Hema is not of strategic importance to the Netherlands. It has also been owned by private equity for many years. The fact that it is currently owned by a billionaire will also raise questions when it comes to state aid.

Nevertheless, the government is looking into providing guarantees, a source said to the newspaper. This could be in the form of the Enterprise Finance Guarantee, a scheme created by the government to support large companies in trouble due to the coronavirus crisis. Through this scheme, the government guarantees 80 percent of loans with a maximum term of six years and up to a maximum of 150 million euros per company. 

But according to FD, the fact that the government hired experienced investment bank Lazard to help with this suggests that the issue more complex than just loan guarantees from the corona scheme and that the government is also looking into other instruments to make Hema structurally healthy. The Ministry of Economic Affairs would not tell FD whether Lazard is called in as standard with every application on the Enterprise Finance Guarantee.  The Ministry is "in constant dialogue" with companies, but "does not make statements about individual companies", is all a spokesperson would say to the newspaper. 

So far it is public knowledge that the government is providing state aid to two large companies. KLM was promised a loan of between 2 billion and 4 billion euros, though the conditions are still under negotiation. And shipbuilder IHC was recently helped with a direct government loan, plus a guarantee on some of its bank debt. Lazard was involved in this rescue operation and IHC's advisor, according to FD.