The financial measures issued by the Italian Government during the outbreak of the pandemic are aimed at ensuring access to credit, support for liquidity, exports, internationalization and investments for Italian companies through a scheme of guarantees granted by SACE S.p.A. (“SACE”) in favour of Italian companies affected by Covid-19 epidemic or by the Central Guarantee Fund in favour of Small and Medium-sized Enterprises (“SMEs”) (Fondo Centrale di Garanzia a supporto delle PMI).
In order to ensure the necessary liquidity in the interest of Italian entities affected by Covid-19 epidemic, Law Decree no. 23/2020 (the so-called Liquidità Decree) provides that SACE will issue irrevocable first-demand guarantees in favour of banks, financial institutions and other entities authorised to carry out lending activities in Italy to guarantee loans made available to Italian companies. SACE’s obligations under the guarantee will be backed by an irrevocable first-demand State guarantee.
Beneficiary of loans: Italian companies (other than banks and entities authorised to carry out lending activities in Italy), (a) which, as at 31 December 2019 , were not classified as an undertaking in difficulty pursuant to EU Regulation no. 651/2014 and (b) the relevant financial exposure of which was not classified as “distressed debts” (crediti deteriorati) as at 29 February 2020.
Aggregate capacity: SACE guarantees may be issued up to an overall amount of EUR 200 billion (EUR 30 billion of which are exclusively dedicated to SMEs).
Loans: the SACE guarantees may only be granted in respect of loans made available after the date of Law Decree no. 23/2020 (the so-called Liquidità Decree, with a maturity up to 6 years; beneficiaries may request up to 24-months of pre-amortisation.
Timing: SACE guarantees will need to be issued by 31 December 2020.
Amount: the amount of the loan guaranteed by SACE may not exceed the higher of:
- 25% of the borrower’s turnover in Italy for the financial year 2019 (as resulting from the approved financial statements for financial year 2019 or from the company’s tax return); and
- two times the borrower’s cost of personnel incurred in Italy in the financial year 2019 (as resulting from the approved financial statements for financial year 2019 or audited accounts or, if the company has started its activity after 31 December 2018, on the basis of the expected employee costs in the first two years and as certified by its legal representative),
in each case on a consolidated basis if the company is part of a group.
Lenders shall demonstrate that their financial exposure vis-à-vis the beneficiary after the utilisation of the new loan is higher than financial exposure vis-à-vis the beneficiary as at the date Law Decree no. 23/2020 (the so-called Liquidità Decree comes into force (subject to any repayment pursuant to agreements already in place at that date).
Coverage: SACE will guarantee up to:
- 90% of the loan where the borrower has less than 5,000 employees in Italy and a turnover not higher than EUR 1.5 billion;
- 80% of the loan where the borrower has more than 5,000 employees in Italy or a turnover between EUR 1.5 billion and EUR 5 billion; or
- 70% of the loan where the borrower’s turnover exceeds EUR 5 billion,
in each case on a consolidated basis if the company is part of a group.
Purpose of the loans: loans backed by the SACE guarantees shall be applied to finance costs of personnel, investments and working capital needs in respect of productive plants and businesses located in Italy, as certified by the borrower’s legal representative.
Guarantee fee: the annual guarantee fee payable to SACE by the borrower will amount to (a) where the borrower is a SME (i) 25 bps for the first year, (ii) 50 bps for the second and third year and (iii) 100 bps for the remaining years; and (b) where the borrower is not a SME (i) 50 bps for the first year, (ii) 100 bps for the second and third year and (iii) 200 bps for the remaining years.
Pricing of loan: lenders’ fees shall be limited to those necessary to cover costs and expenses. Moreover, lenders shall document that the pricing applied to the SACE backed financing is lower than the pricing they would have applied in the absence of the SACE guarantee, although the Law Decree no. 23/2020 (the so-called Liquidità Decree does not set out any method of calculation of the difference, nor provides for a minimum difference to be applied.
Contractual restrictions: the borrower (and any other entity of the group incorporated in Italy) shall contractually commit not to authorise dividend distributions or the purchase of treasury shares during the calendar year 2020. In addition, the borrower shall manage its employment levels through union agreements.
Process: where the borrower has less than 5,000 employees in Italy and a turnover not exceeding EUR 1.5 billion, the issuance of the guarantee is subject only to the positive credit approvals of the prospective lenders.
In all other cases, the issuance of the guarantee is subject to the prior approval of the Ministry of Economy and Finance, which shall take into account the borrower’s role in the following areas (I) contribution to technological development, (II) logistics and restock chain, (III) critical and strategic infrastructures, (IV) occupational levels and employment market and (V) any strategic production chain.
Central Guarantee Fund for Small and Medium-sized Enterprises (SMEs)
The terms of the Central Guarantee Fund for SMEs (“CGF”) are modified until 31 December 2020 and the CGF, derogating from its current legislative framework, will offer loan and portfolio guarantees on more favorable terms to SMEs and mid-caps, including those which are going through financial stress within certain limits. In particular, with regard to loan guarantees, the following measures are enhanced: (i) the granting of the guarantee is free of charge, (ii) increase of the maximum amount guaranteed, (iii) increase of the coverage percentages, (iv) relaxation of the borrower’s eligibility conditions, (v) issuance of the guarantee also with regard to renegotiated loans (subject to conditions), (vi) automatic extension of the guarantee in case of interruption of the payments by the bank, (vii) removal of certain fees.
Moreover, the maximum coverage of the guarantee has been extended to the entire amount of the loan (100%), for loans granted in favour of SMEs (and individuals carrying out business activities, professionals and artisans) affected by Covid-19 epidemic, provided that the loans (i) shall have a duration between 24 and 72 months and (ii) the relevant amount shall not exceed the lower of 25% of the borrower’s income and EUR 25,000 (the application form is available at this link). The approval of the applications submitted from 8 April 2020 will be without credit assessment also for start-ups.
In addition to the measures set out above, until 31 December 2020, guarantees in relation to loan portfolios with certain characteristics are enhanced.
Additional information on these measures is available on the website of the Ministry for Economic Development (link) and in the operational circulars and clarifications of the CGF (available here).
SACE guarantees for Small and Medium-sized Enterprises (SMEs)
SMEs which have already made full use of their access capacity to the CGF can apply through their bank for the loan guarantee issued by SACE, Under the new Counter-Guarantee Mechanism by SACE and the State, at least EUR 30 billion (out of EUR 200 billion) are reserved for SMEs. The measure is intended to ensure the necessary liquidity in the interest of Italian entities affected by Covid-19 epidemic by enabling SACE to issue irrevocable first-demand guarantees in favour of banks and other financial institutions to guarantee loans made available to Italian companies. SACE’s obligations under the guarantee will be backed by an irrevocable first-demand State guarantee.
SMEs may access the guarantee scheme provided that (a) as at 31 December 2019, they were not classified as an “undertaking in difficulty” pursuant to EU legislation and (b) their financial exposures were not classified as “non-performing loans” (crediti deteriorati) as at 29 February 2020. The issuance of the guarantee for SMEs will be subject to the positive credit approval of the prospective lender.
Additional information on this measure and on the application procedure is available on the website of SACE (“Garanzia Italia” section)
Moratorium of loans with a partial government guarantee
Micro-enterprises and SMEs which have suffered liquidity shortages as a consequence of Covid-19 and whose debt exposures are not classified as “non-performing” may request a moratorium on specified loan payments and credit lines which will last until 30 September 2020. The loans and credit lines covered by the moratorium will benefit from a free government fund guarantee equal to 33% of the relevant amount (which would depend on the type of financing).
Additional information on this measure and on the application procedure is set out in the webpage of the Ministry of Economy and Finance (here).