COVID-19: Terms and conditions determined for third tranche of ICO guarantee facilities

That council of ministers’ resolution has specified the following:

a. Third tranche of the COVID-19 ICO Guarantee Facility

Applicable terms and conditions and requirements to be met for the third tranche of the guarantee facilities provided by the Ministry of Economic Affairs and Digital Transformation (MINECO).

The additional terms and conditions of the third tranche must be included in each master agreement that each credit institution, specialized credit institution, electronic money institution and payment institution has signed with ICO. They are as follows:

1. Amount: up to €20,000,000,0000 with two sub-tranches amounting to up to an additional €10,000,000,000 each, for small and medium-sized companies and the self-employed, and, the second, for companies not qualifying as small and medium-sized;
2. Use: as with the previous two tranches, the guarantees secure performance of the obligations arising from the financing provided to companies and the self-employed by credit institutions, specialized credit institutions, electronic money institutions and payment institutions to soften the effects on their activities as a result of the COVID-19 outbreak;
3. Application period: until September 30, 2020 (extendible);
4. Prior terms and conditions: all the terms and conditions specified for the first and second tranche are also applicable to the third tranche.
5. Undrawn amounts: undrawn amounts cannot give rise to any finance cost or expenses.
6. Purpose: the purpose is the same as for the first and second tranches, except that a condition that ICO has been demanding has been included that the funds in the granted facilities cannot be used for the payment of (annual or interim) dividends.

b. Guarantees to issuers on MARF

Royal Decree-Law 15/2020 also specifies that promissory notes placed on AIAF (Spain's benchmark market for corporate debt and private fixed income) and on MARF can benefit from the guarantees. In this way, it encourages access to liquidity on the capital markets as well as on banking channels.

Issuers will have to evidence through their placement agents, to Bolsas y Mercados Españoles Renta Fija S.A.U, and the governing body of the MARF market, and to ICO that they are compliant with the requirements, terms and conditions and limits specified in the council of ministers’ resolution to be eligible for the guarantees.

The main terms and conditions for the guarantees are as follows:

1. Amount: up to €4,000,000,000.
2. Beneficiaries: non-financial companies having their registered offices in Spain and which on entry into force of Royal Decree-Law 15/2020 had promissory note programs in progress and placed on MARF and do not qualify as distressed businesses (in particular, they cannot be subject to an insolvency proceeding as of March 17, 2020, either as a result of filing a petition for an insolvency order, or due to the existence of the circumstances mentioned in article 2.4 of the Insolvency Law, for a petition for an insolvency order to be made by the creditors[1].
3. Term: the promissory notes have to be issued before September 30, 2020 (extendible).
4. Maximum amount per company: the amount of the promissory note program concerned.
5. Maximum guaranteed amount: 70% of the amount of every issue.
6. Maturity period: will coincide with the maturity date of the guaranteed promissory note up to a maximum of 24 months.
7. Remuneration: 30 basis points per annum of the guaranteed amount for promissory notes with maturities of up to 12 months and 60 basis points per annum of the guaranteed amount for promissory notes with maturities between 12 months and 24 months.
8. ICO's management and administration fees: a  0,05% flat fee, calculated on the size of the guaranteed portfolio.
9. Applicable jurisdiction: must be Spain in every case.
10. Use: the issuers have to use the obtained funds to meet their liquidity needs arising, among other items, from wage payments, managing suppliers’ invoices, cash-flow needs, and financing and tax obligations falling due, or other liquidity needs. It has been specified that they cannot be used for the payment of annual or interim dividends.

c. CERSA granted reinforcement of counter guarantee

To continue supporting small and medium-sized companies, Royal Decree-Law 15/2020, of April 21, 2020, allowed reinforcement of the counter guarantee provided by CERSA, thereby increasing the guarantee capacity of mutual guarantee societies.

Administrative management of the guarantee between MINECO and CERSA, and the recovered funds in the event of its enforcement, will be carried out by CERSA under the procedure that will be determined in the master agreement between both entities.

The agreement determines the terms and conditions of the guarantee granted to CERSA. The main terms and conditions are as follows:

1. Beneficiaries: it is a counter guarantee facility or a facility to partially underwrite the risk assumed by mutual guarantee societies.
2. Use: to encourage lending to small and medium-sized companies to meet their financing needs arising in relation to wage payments, invoices, cash-flow needs or other liquidity needs.
3. Total amount: up to €500,000,000.
4. Maximum percentage of the guarantee: the maximum counter guarantee percentage that may be covered by MINECO will be 80%. The percentage will vary for each transaction to add to the counter guarantee provided to CERSA by the EIF without exceeding 90% in aggregate.
5. Application period: they may be requested for all transactions completed by CERSA between April 1 and September 30, 2020.
6. Maturity period: will coincide with the date of the counter guarantee approved by CERSA up to a maximum of 5 years.

[1] It is notable in relation to this point that, despite being published on May 9, 2020, it makes no reference to the revised Insolvency Law published on May 7, 2020 because this law does not enter into force until September 1, 2020.