New developments regarding ICO-backed debt financing

Spain

Flexibility measures on renegotiating guaranteed transactions and new guarantee facility


New developments regarding ICO-backed debt financing
March 30, 2022

In its meeting of March 29, 2022, the Spanish Council of Ministers approved Royal Decree-Law 6/2022, implementing urgent measures in the framework of the National Plan to respond to the economic and social impact of the war in Ukraine (“RDL 6/2022”). RDL 6/2022 has been published in the Official Gazette of the Spanish State today and will come into force on March 31, 2022.

RDL 6/2022 includes a wide variety of measures and extensive regulations. We focus here on the new set of measures regarding the regulation of the guarantee facilities to cover financing granted by the state through the Spanish State Finance Agency (Instituto Oficial de Crédito or “ICO”) in the framework of the COVID health crisis: the facilities provided under Royal Decree-Law 8/2020 and Royal Decree-Law RDL 25/2020 (the “COVID Guarantee Facilities”).

RDL 6/2022 amends the regulation of the COVID Guarantee Facilities and creates a new guarantee facility to mitigate liquidity pressures resulting from the increase in the price of energy and other raw materials, as explained below.

The COVID Guarantee Facilities

After approving RDL 6/2022, the Council of Ministers also adopted a resolution to implement certain provisions of RDL 6/2022 regarding the COVID Guarantee Facilities.

In particular, RDL 6/2022 and the Council of Ministers resolution introduce the following three amendments to the Code of Good Practice for renegotiating financing with a public guarantee under the COVID Guarantee Facilities provided by RDL 5/2021 (the “Code of Good Practice”), and which financial institutions can adhere to voluntarily, facilitating and encouraging the coordination between institutions in the context of these restructuring transactions:

> To be eligible for the measures implemented in the Code of Good Practice, it is no longer required for the borrower’s annual turnover to have fallen by more than 30% in 2020 compared to 2019. With the elimination of this requirement, the potential beneficiaries of the measures of the Code of Good Practice could increase substantially.

> SMEs and self-employed workers belonging to the agricultural, livestock, fishing and road transport sectors that apply for a maturity extension under the Code of Good Practice (or have already obtained the maximum maturity period) will be entitled to a six-month moratorium or an extension of the grace period of up to six months.

The possibility of an agreement between the financial institutions and the borrowers on the extension of the grace periods of the guaranteed financings stays. The extension has to be communicated before June 1, 2022.    

> The third amendment readjusts the periods during which financial institutions adhering to the Code of Good Practice must keep the working capital facilities open to their borrowers and, in particular, to those benefiting from measures for debt refinancing under RDL 5/2021 and the Code of Good Practice.

For more information regarding the measures of RDL 5/2021 and the Code of Good Practice, please see our Legal Flash Spain | ICO-backed debt refinancing.

New Guarantee Facility

RDL 6/2022 also creates a new guarantee facility to cover the financing granted by financial institutions to companies and self-employed workers, with the objective of financing their liquidity needs or investments.

The facility is for up to €10 billion and will be available until December 31, 2022.

As in the case of the COVID Guarantee Facilities, the applicable conditions and the requirements to be eligible for the new facility will be established in the Council of Ministers’ resolutions.

The same recovery and collection regime of the COVID Guarantee Facilities applies to the new guarantee facility.

This guarantee facility is granted in connection with the Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia, provided in the European Commission Communication published in the Official Journal of the European Union on March 24, 2022 (C/2022/1890).

 

 

March 30, 2022