By means of the above-mentioned RD-Law 8/2020 the Spanish Government has approved the granting of the ICO Guarantee Line for a maximum amount of EUR 100 billion in order to secure certain facilities granted by financial institutions to companies and self-employed individuals.
In this regard, the Spanish Ministry of Economic Affairs and Digital Transformation will grant such guarantees with the aim of implementing the necessary measures to ensure the liquidity and preserve the productive activity and employment of the self-employed and companies (mostly small and medium).
The ICO Guarantee Line will be approved in different tranches by means of the relevant council of ministers publishing the relevant resolutions and the main characteristics applicable to such tranches shall be the same, although there might be certain specific conditions only applicable to the relevant tranche.
The applicable conditions to the guarantees and the requirements to be met have been approved by means of the Resolution of 25 March 2020, of the Secretariat of State for Economy and Business Support, publishing the Council of Ministers’ Resolution of 24 March 2020, approving the characteristics of the first section of the ICO Guarantee Line for companies and self-employed individuals, to mitigate the economic effects of COVID-19 (the “Resolution of 25 March 2020”) approving a first tranche of guarantees for a maximum amount of EUR 20 billion, of which 50% will be reserved to secure loans granted to self-employed and small and medium companies.
The specific provisions of the Commission Regulation (EU) No. 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the TFUE to the minimis aid will apply for transactions for an amount of less than EUR 1.5 million (in one or more transactions) granted to self-employed individuals and companies. This is, the guarantee may not exceed 80% of the amount of the underlying transaction and the duration of the guarantee may not exceed five (5) years.
On the other side, for transactions for an amount over EUR 1.5 million, the maximum amount provided in the European Commission’s Temporary Framework for Public Aid will be applicable, both for self-employed individuals and companies. However, this limit may vary according to the maturity date of the secured operation:
- For transactions with a maturity date after 31 December 2020, the amount of the principal being guaranteed may not exceed the lower of the following thresholds:
- twice the annual wage bill for 2019 or the latest year available (including social charges and the cost of subcontractors’ workers at the headquarters of the company)
- 25% of total turnover for 2019. However, with appropriate justification and on the basis of a self-certification of the liquidity needs of the company, the amount of the secured transaction could be increased to cover the liquidity needs for the 18 months following its granting, for medium and small companies, and for the 12 months following its granting for large companies.
- For transactions with a maturity date of up to 31 December 2020, the principal amount to be guaranteed may be higher than the limits indicated in the previous paragraph, provided that there is a justification and the proportionality of the aid is ensured.
Please note that the Resolution of 25 March 2020 has determined that this measure will be applicable differently considering the amount of the transaction. On one side, if the transaction is up to EUR 50 million, it shall be approved by the relevant financial institution involved in accordance with its internal risk policies. Once the measure is implemented, these transactions might be subject to subsequent checks on their eligibility conditions by the Official Credit Institute (Instituto de Crédito Oficial). On the other side, if the transaction is above EUR 50 million, it shall only be guaranteed once the Official Credit Institute (Instituto de Crédito Oficial) has analysed the compliance with the eligibility conditions as a complement to the financial institution’s analysis.
These guarantees will secure 80% of the new loans and the renewal of existing transactions requested by those self-employed and small companies. For the rest of the companies, the guarantee shall secure 70% of new loans granted and 60% of the renewal of their operations. No further information is available in respect of requirements to be met for the granting of the guarantees.
The term of the guarantees will be equal to the term of the loan granted or renewed, with a maximum term of five (5) years. The cost of the guarantees will be between 0.2% and 1.2%. Such cost will be borne by the financial institutions granting or renewing the loans.
Interested companies and the self-employed may apply for the guarantee until 30 September 2020 by contacting the financial institutions with which the Official Credit Institute (Instituto de Crédito Oficial) has signed the corresponding collaboration agreements. In this regard, the financial institutions undertake to maintain, at least until 30 September 2020, the limits on the working capital credit lines granted to all customers and, in particular, those customers whose loans become guaranteed by this measure.
The second tranche of these guarantees has been approved for an amount of up to EUR 20 billion by means of the Resolution of 10 April 2020, of the Secretariat of State for Economy and Business Support, publishing the Council of Ministers’ Resolution of 10 April 2020, which instructs the Official Credit Institute to implement the second tranche of the guarantee line approved by Royal Decree-Law 8/2020 of 17 March and establishes that its beneficiaries are small- and medium-sized companies and the self-employed affected by the economic consequences of COVID-19 (the “Resolution of 10 April 2020”).
Although the applicable conditions to this second tranche are the same as the ones applying to the above-mentioned first tranche, the Resolution of 10 April 2020 introduces the following specific characteristics, which are only applicable to the second tranche:
- it is only applicable to small- and medium-sized companies and the self-employed affected by the economic consequences of COVID-19
- the new financing transactions guaranteed under this measure will have to contain lower costs than other transactions of the same kind that would have been previously entered into without this guarantee. This measure will be monitored by the Official Credit Institute (Instituto de Crédito Oficial)
- financial institutions shall apply the best banking practices for the benefit of customers and may not market any other products when granting loans covered by this public guarantee or make its granting conditional on the customer contracting other products.
Moreover, article 9 of RD-Law 11/2020 approved the granting of a guarantee line on behalf of the State to secure the financing of socially and economically vulnerable tenants as consequence of COVID-19. This regulation authorises the Ministry of Transport, Mobility and Urban Agenda so that, by means of an agreement with the Official Credit Institute (Instituto de Crédito Oficial), it issues a guarantee line with full coverage by the State, so that financial institutions can offer interest-free financing to individuals who are in a situation of vulnerability so that they can pay the rent of their main residence for an amount of up to six (6) monthly rent payments (as described in section 5.d) below). The financing made available under this programme would have a maximum term of repayment of six (6) years, extendable to up to four (4) additional years in exceptional cases.