It makes credits guaranteed by the ICO more flexible, extends the suspension of bankruptcy proceedings and protects strategic sectors from foreign investment
The Government took action on Tuesday to try to shore up the liquidity and solvency of Spanish companies in the face of a second wave of coronavirus that threatens to prolong the crisis and continue to undermine the ailing situation of the Spanish productive fabric. The new package, among other things, makes state-guaranteed loans more flexible, extends the bankruptcy moratorium, shields strategic sectors from foreign investment, and incorporates new aid and tax breaks.
“This royal decree law, like all those previously authorised, seeks to minimise the effects of the economic and social crisis by focusing on protecting the productive structure, employment and family incomes,” argued the third vice-president and Minister of Economic Affairs, Nadia Calviño, at the end of the Council of Ministers that gave the green light to the plan. “In this way we will be able to continue to preserve the economy so that it continues on the path of growth” that it resumed in the summer, she said.
"We are in a highly uncertain scenario" that requires taking additional measures, after avoiding the destruction of three million jobs and a 251% drop in GDP with the previous measures, he said, although he assured that "the Government's central scenario for the fourth quarter is not a fall or negative growth in GDP."
The priority now, he said, is to prevent viable companies from closing due to specific liquidity problems, or other imbalances caused by the pandemic, helping companies to preserve their solvency.
The guaranteed credits
To this end, the Executive relaxed the conditions of the bank financing guaranteed by the State through the Official Credit Institute (ICO) on Tuesday. The idea is that repaying this financing now does not create new problems. The changes affect both the initial line of liquidity guarantees, for 100 billion euros, and the second, endowed with 40 billion to cover investments.
In order to “reduce the probability of defaults” by the companies benefiting from the loan, which would mean that the coverage of up to 801% of the risk would generate a public cost, the Ministry of the Economy has increased the grace period for payment of the principal of the loan from 12 to 24 months. At the same time, it has extended the duration of credits and guarantees by up to three years, going from a maximum of five to a total of eight years.
Finally, it gives interested firms the opportunity to continue applying for these credit lines until June 30, 2021, instead of limiting them to December 2020.
Bankruptcy moratorium
Another of the plan's action legs is the extension from October 30, 2020 to March 14, 2021 of the suspension of voluntary or necessary bankruptcy proceedings, at the request made by debtors and creditors, respectively, and their admission by the judge.
In parallel, the regulation also extends the temporal scope of the measures of inadmissibility to processing by the judge of requests for breach of agreement submitted by creditors and requests for breach of refinancing agreement.
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