FedEx Corp disclosed it would pull $1.5 billion from a credit line on Friday and cut top executives' salaries as stay-at-home orders to work out the spread of coronavirus in the United States and Europe for its money-making express services.
The delivery giant headquartered in Memphis stated it will tap debt markets to raise reserves as the pandemic jolts its business-to-business operations, thus boosting demand for low-margin home deliveries.
Based on a regulatory filing on Friday, the company's board also gave the green light for a 91 percent reduction in the base salary of Chief Executive Frederick Smith for six months beginning April 1.
As for the drawdown of the credit facility, FedEx said it acted to maximize its liquidity position in order to maintain financial stability in light of fragmented access to commercial paper markets and increasing volatility caused by the pandemic to global financial markets.
The company said it expects to benefit from the terms of the $2 trillion fiscal stimulus plan and future government relief measures.
The gross compensation for Smith in 2019 was $1,373,561, according to the new FedEx proxy statement. His gross pay rose to $15,961,974 with incentive grants, along with other forms of compensations.
Meanwhile, as with most companies, FedEx has taken a hit from the ongoing global health crisis. Although business demand in Asia is on the rise due to backlogs caused by the virus, the filing said, there is no guarantee that these higher rates will be sustainable as economic conditions are weakening in Europe and the US.
As a result of shelter-in-place orders and other steps taken to limit the spread of the disease, European demand meanwhile sloped downward.
FedEx and the broader United Parcel Service competitor asked the United States Treasury to act rapidly and approve billions of dollars in state loans to help the industry. In the FedEx Form 8-K filed with the Securities and Exchange Commission on April 3, 2020, it was stated that the company is eligible to participate in certain government grant, loan, loan guarantee and investment programs.
The company cautioned that participating in these initiatives might limit its capacity to pay the shareholders dividends and buy back stock. This may also demand that the corporation offer a government entity equity interests in FedEx.
On the bright side, though FedEx's business-to-business demand has dimmed from the pandemic globally, US demand for FedEx Ground residential delivery services has increased as a result of rapid e-commerce volume increases, the company said.
FedEx shares traded at $111.42 at the last scan, down 4.48 percent. In the last three months, stock has dropped by 28 percent.