The Government finally unlocks capital aid to companies with the support of the bank

  • The Treasury tells the Bank of Spain, AEB, CECA and the five large banks that the idea is to approve them in March, although it will depend on Brussels

  • Employers prepare a study with data from the supervisor on the state of business debt and its possible impact on public accounts

  • The idea is to approve a kind of code of good practices to deal with refinancing under equal conditions for entities and the ICO

  • The new temporary framework for community State aid allows the Executive to advance in the approval of direct support for solvency

  • Economy highlights that direct aid to companies equivalent to more than 5% of GDP has already been approved

The government and the bank they have been since at least end of august last year analyzing measures to prevent hundreds of thousands of Business that go through liquidity difficulties as a consequence of the pandemic disappearing by solvency problems caused by the lengthening of the crisis. The movements, however, have accelerated in recent days. This same week there was a new meeting by videoconference between the Ministry of Economy (represented by the treasure and the Official Credit Institute, ICO), the Bank of Spain, the employers AEB and CECA, and the big five banks (Santander, BBVA, CaixaBank, Bankia and Sabadell). And this Friday the Executive has finally officially confirmed that “it will reform the legal framework in order to increase direct aid to freelancers and companies “.

The negotiations have dealt with three issues. The first was the lengthening of deadlines of maturity and lack of credits that banks have granted to companies with endorsement of between 70% and 80% of the ICO (115,225 million euros in 951,053 operations, 98% for the self-employed and SMEs), which was approved last November. The second focuses on how refinance to viable companies that have received these credits and are experiencing payment difficulties. And the third is how strengthen solvency of struggling sustainable businesses through capital grants. The latter is the one most behind, but “the Treasure for the first time has verbalized yes, that we are going to it “, maintain banking sources.

The idea a few weeks ago was to first approve the refinancing measures and then the solvency aid, but the Government now plans to give the green light to the entire package at once. The Secretary General of the Treasury, Carlos San Basilio, has transferred in the meetings that “you have to keep working to have it ready in March“, according to financial sources. The Ministry of Economy points out, for its part, that the intention is to approve the plan “sooner”, but it specifies that for this the authorization from the European Commission and that it will take a while to get it.

Impact study

Work is being done on making a estimate from which part of the business debt is sustainable (read, payable), which part is untenable (It could not be paid even by refinancing it due to the poor prospects of the company), and what part can be paid if their conditions change. The Banco de España has agreed with AEB and CECA give access to aggregated and anonymous data from his Risk Information Center and his Central Balance Sheet for the employers to carry out a study that “makes it possible to assess the impact of Covid-19 in the Spanish business sector and identify possible measures to meet the possible temporary liquidity needs caused by the pandemic. “Last year, the bank hired the consulting firm Oliver Wyman as an advisor.

This report should be used to calculate what impact the public accounts, since the measures of refinancing and restructuring that are contemplated go through lengthening of terms, you take away in debt or conversion of part of said equity debt. For this, sources from the administration explain, the Government will have to adopt “legislative measures”, since the current regulations do not allow the ICO to assume deductions and it makes it difficult (there are legal doubts about whether it is possible) to refinance the non-guaranteed debt of a company that has received credits with a guarantee from the ICO.

The idea, as this newspaper advanced in December, is to create a Framework of action that contemplates a series of situations different from companies, such as being in bankruptcy, in pre-bankruptcy, having both unsustainable and sustainable debt, begins to default, or falls into default (more than 90 days without paying the installments). Said framework of action will establish a “kind of a code of good practice”, point out various sources, who will commit to comply with the banks and who seeks both prevent them from competing each other to achieve better conditions in the refinancing as they go ahead to try endorse all loss to ICO. Once underway, the ICO will not have to approve all refinancing, only perhaps the largest, without prejudice to the fact that it can control a posteriori that everything has been done well.

European green light

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As regards solvency support measures, as this newspaper published in November, they are being analyzed direct grants, inflows into equity and corporate debt (with instruments like participatory credits), or the creation of a public-private venture capital fund. Last week the European Commission approved the extension of the State aid time frame until the end of the year and, as a novelty, it will allow the conversion of repayable advances, guarantees, loans or other instruments into direct grants to the companies, which finally gives the Executive room to approve the support. “The Government is working on measures to ease financial burden of freelancers and companies, and strengthen solvency of viable businesses “, has confirmed this Friday Economy.

The Ministry that directs Nadia Calvin has announced that the Government Delegate Commission for Economic Affairs has agreed to notify the European Commission of the extension of the national framework applicable to all public aid that can be granted by the different administrations. The implementation of this framework must be approved by Brussels. Economy has also wanted to deny that direct aid has not already been approved: public supports, he has wielded, are equivalent to 20% of PIB (more than 5% in direct aid of budgetary impact and 15% in liquidity measures) and direct aid are among the highest of the large countries of the European Union, according to a report by the National Securities Market Commission.

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