The Official Credit Institute (ICO), Spanish Stock Markets and Fixed Income Markets, the Spanish Company of Reinforcement (Cersa) and the General Secretary of the Treasury They have 20 days to start the third line of guarantees for companies and the self-employed for the amount of 24,500 million euros approved last Tuesday by the Government.
This is stated in the resolution of the Secretary of State for Economy and Business Support, under the Ministry of Economic Affairs and Digital Transformation published this Saturday in the Official State Gazette (BOE).
The guarantees for this third tranche may be requested until September 30, 2020. The term may be extended, always in line with the EU State Aid regulations.
The Council of Ministers agreement reinforces the obligation of the companies benefiting from the guarantees to use the financing obtained to face liquidity needs such as invoice management, payment of payrolls or suppliers, the need for currency or maturities of financial and tax obligations , not being able to use it for the distribution of dividends.
So far, 40,000 million euros have been made available to companies and freelancers in guarantees released in the first two tranches. 75% of these guarantees have been used to cover the liquidity needs of SMEs and the self-employed, since they understand that they are the economic agents that require it most.
Given the proper functioning of this guarantee system, this agreement releases an additional 10 billion euros for SMEs and the self-employed and another 10 billion euros for companies that are not considered SMEs. 50% of the total amount will go to financing SMEs and the self-employed, while the remaining 50% will go to companies.
The distribution of the line of guarantees among the operators will be carried out according to the criteria established in the second tranche, although for this third tranche the distribution of the maximum volume assigned will be valid until June 30. From that date, the amounts of guarantees assigned and not used by the entities will be distributed among the rest of the operators, proportionally to the amount of the guarantees that they would have used up to that date.
Once the section is enabled, more than 60% of the 100,000 million euros of the business financing aid program will have been consumed. This line is managed by ICO, in collaboration with financial entities, which assume the cost of the guarantee, which is in a range of between 20 and 120 basis points.
The only requirement to access this guarantee is that the applicants were not in default as of December 31, 2019 and in bankruptcy procedure as of March 17, 2020.
On the part of banks, the sector must comply with all the requirements established in the agreements and in the framework contract with the ICO. Entities may not charge any financial cost or expense on amounts not arranged by the customer. Otherwise, material breaches of their obligations will be considered a breach of discipline.
4,500 MILLION FOR MARF AND CERSA
Similarly, the Government has set up a line of 4,000 million euros for loans channeled through the financing system based on promissory notes of the alternative fixed-income market (MARF), which will be managed in collaboration with Bolsas y Mercados Españoles (BME) .
The maximum amount of the guarantee will be 70% of the principal of each of the issues and the maximum term of 24 months. The cost will be 30 basis points for guarantees with a maturity of up to 12 months and 60 basis points for guarantees with a maturity of between 13 and 24 months.
These 4,000 million euros are part of the recently announced extension of the ICO lines to the MARF, with the aim of promoting the maintenance of financing that occurs in the capital markets that Spanish companies usually resort to and which remained practically suspended due to the health emergency situation.
One of the necessary conditions to access the ICO guarantees in the MARF is that the companies have their registered office in Spain, in order to avoid that companies domiciled in tax havens can be accepted or that the funds can be used to distribute dividends.
The remaining 500 million euros of this item of 24,500 million euros of guarantees are linked to mutual guarantee companies by Cersa.
In this case, the maximum guarantee will be 80% and for a period of up to five years, although it may vary in each operation to complement the guarantee that the European Investment Fund (EIF) also grants to Cersa, without both guarantees being able to jointly exceed 90%.
Apart from the total amount of the guarantees (64,000 million), the financial expenses associated with all the tranches that have been released so far amount to 32 million euros until the year 2028.
The management and administration fee is 0.05% flat, calculated on the volume of the guaranteed portfolio prorated 5 years.
300,000 OPERATIONS UNTIL THIS WEEK
As of Wednesday, May 6, 298,971 operations had been registered between the three approved tranches of the line of public guarantees of the Official Credit Institute (ICO), for a total amount of almost 40,000 million of guaranteed financing, and in 98% of the cases of operations have been with SMEs and the self-employed.
During his appearance before the Economic Affairs Commission in Congress to explain the economic impact of the pandemic and the measures implemented to alleviate the crisis, Calviño highlighted that the three sections of the ICO guarantee line that have been unblocked already amount to 64,500 million euros.
Of the almost 40,000 million euros in financing, the State has guaranteed 30,192 million euros. In a statement, the Ministry has detailed that the largest volume of operations and financing is concentrated in SMEs and the self-employed, with 293,387 loans approved, 98% of the total, and a guaranteed amount of 20,873 million euros.