Which firms took COVID-19 payment breaks?

We use end-May 2020 loan-level data from three major Irish banks to examine which Irish firms took COVID-19 payment breaks. We show that SME borrowers were significantly more likely to utilise a payment break compared to Large Corporate borrowers, even after taking a host of loan and borrower characteristics into account. We find that borrower sector is the best available predictor of payment break utilisation. Borrowers in sectors with high shares of employees on Pandemic Unemployment Payment or the Temporary Wage Subsidy Scheme had substantially higher payment break rates. While some regions of the country have higher payment break rates than others, we find that this is mostly due to the sectors in which borrowers in those regions trade. We show that performing loans with weaker credit quality prior to the pandemic were moderately more likely to utilise a payment break. Similarly, loans with a record of having been previously nonperforming were more likely to have a payment break. Nonetheless, the majority of borrowers that took a payment break showed no explicit signs of vulnerability prior to the shock. Our results support the view that payment breaks provided valuable temporary liquidity relief to firms in sectors experiencing a severe deterioration in trading conditions due to the pandemic.