New estimates from AMP Capital show the full extent of the “unprecedented capital squeeze” facing big and small business during the coronavirus crisis.

The $130 billion JobKeeper stimulus program hailed by the Washington, DC-based Brookings Institution as a world-leading crisis response policy was found to be the biggest contributor to boosting corporate balance sheets.
Its only prudent that companies cut or defer dividends, draw down revolving lines of credit or issue debt or even equity to ensure companies get over the liquidity bridge,
Dermot Ryan, AMP Capital
The federal government has done a great job in containing the virus outbreak in Australia and quickly launching the generous JobKeeper stimulus to keep businesses and employment intact through the lockdown, Mr Ryan said. The reopening phase has the potential to be far more divisive, but we must look to do it as quickly and as safely as possible to ease the constriction of the lifeblood of the economy.
An extra $6 billion was lapped up under the government’s relief measures aimed at small and medium businesses, including the Coronavirus SME Guarantee Scheme, which allows banks to provide loans of up o $250,000 to businesses with maximum annual turnover of $50 million, backed by a new and temporary line of funding from the Reserve Bank of Australia.
The rest of the total $350 billion figure was attributed in the AMP Capital analysis to banking facilities ($45 billion), bond issuances ($31 billion), dividend cuts ($19 billion), listed equity issuance on the Australian sharemarket ($15 billon), cancelled share buybacks ($9 billion) and a “rough estimate” of $7 billion in rent abatements nationally.
Its only prudent that companies cut or defer dividends, draw down revolving lines of credit or issue debt or even equity to ensure companies get over the liquidity bridge, the portfolio manager said.
However, he acknowledged that many companies face a tough decision in weighing up their capital raising options amid the crisis.
For companies our current economic slump is pitting many of your traditional company stakeholders against each other. Companies are having to decide on using cash and debt facilities to pay invoices, dividends, wages or spend capital expenditure for future growth.
That bind is particularly pronounced for companies opting to cut or defer dividend payments. In the past week, major banks ANZ and Westpac deferred their dividend decision, while National Australia Bank cut its dividend by 64 per cent and Insurance Australia Group said it would be unlikely to declare a dividend.
The moves drew criticism from both retail and institutional investors, who claimed big corporates were hitting retirees, who rely on dividends for everyday income, at the worst possible time.
But Mr Ryan said long-term investors need to be patient and that normal distributions would be return as the broader economy recovers.
It is important to remember that this period is transitory, and the crisis will pass, he said.
Shareholders should consider valuing companies on a mid-cycle three-year basis so they can calmly look through the short-term pause to find companies that can grow their earnings and dividends in normal times.
The estimate that a total of $15 billion will be raised through equity markets follows new disclosure rules being slapped on issuing companies by the ASX, with encouragement from the Australian Securities and Investments Commission.
Corporate law firm King & Wood Mallesons predicted the new rules would become “grit in the gears” of equity markets and slow down the pace of coronavirus capital raisings.