The issuance of promissory notes backed by the ICO will begin in June

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The Public Treasury, the Ministry of Economic Affairs and Spanish Stock Exchanges and Markets (BME) continue to work on the development of the machinery of the line of public guarantees with which they seek to reactivate the corporate debt market in the short term so that companies they can also obtain liquidity through this channel. The Official Credit Institute (ICO), as approved by the Government earlier this month, will guarantee up to 70% of the issuance of promissory notes in the Alternative Fixed Income Market (MARF). According to what ABC has learned, this week the design of the framework contract under which these emissions will be made will be closed, so that the first ones are expected to take place around the middle of next June.

Along with the 100,000 million euros in ICO guarantees for loans to large companies, SMEs and the self-employed, the Executive has approved an additional 4,000 million in guarantees to the promissory notes issued in the MARF by companies based in Spain. The measure was already announced on April 21, but its details were not approved in the Council of Ministers until May 5. That small print gave the ICO, the Public Treasury and BME a maximum period of 20 days to effectively implement this line of guarantees.

This week, when that deadline is met, the framework contract to be signed by the ICO and BME as managers of these guarantees will be presented with each of the beneficiary companies and the financial entities that place the notes. The companies that can request this guarantee to issue promissory notes are those with headquarters in our country, that as of March 17, 2020 were not in bankruptcy and that had approved and registered in the MARF a promissory note issuance program before April 21 , when the measure was released.

However, the current issuance brochures of these already registered promissory note programs will not serve, since they do not include the possibility that these securities are endorsed by the State or the new conditions under which that corporate debt would be issued, according to sources familiar with the process. Therefore, those companies that are finally going to issue with this public shield must review these brochures and adapt them to this new circumstance. “The programs registered in the MARF must collect the guarantees that are granted within this line after the signature of the corresponding guarantee contract”, is added in the conditions published on May 9 in the Official State Gazette (BOE).

This will require its prior modification, so that between this procedure and others it is expected that the first placements of promissory notes will occur around the middle of next June. Then, the companies will have until September 30 of this year to issue these guaranteed promissory notes, although the Government has left the door open to extend that term if the Council of Ministers approves it.

The State, through the ICO, will guarantee up to 70% of the amount of the promissory note program with a maturity of up to two years from each company, for a maximum set of 4,000 million euros, which will allow the mobilization of more than 5,700 million euros in titles of this type. That money should be used to cover liquidity needs, such as paying bills and payrolls, and never to pay dividends.

Currently, MARF has registered a total of 48 promissory note programs from as many companies for a maximum balance of 6,585 million euros. However, a few will not be able to avail themselves of the ICO guarantee line. Of this amount, the companies have previously issued some 2,500 million, so that the 4,000 million in guarantees would be more than enough to cover the placement of the remaining amount by the companies.

Option for more investors
The management of BME trusts that the MARF, created in 2013, as a result of the past financial crisis, to give an accessible financing alternative to the country’s companies, now plays a fundamental role in the injection of liquidity to companies . In this sense, the fact that the State guarantees a good part of the issuance of promissory notes will make institutional investors who would not be able to acquire promissory notes from these companies due to not having a sufficient «rating», now they do so because these placements will benefit from the superior credit rating of the Kingdom of Spain.

Among the potential beneficiaries of this ICO shielding are companies such as El Corte Inglés, which has a registered promissory note program for a maximum balance of 1,200 million euros and of which, for now, has placed 352 million in a total of ten issues, as stated in MARF records. In other words, the department store group could request the ICO to guarantee up to 593 million euros of future promissory note issues.

Other notable programs are those of Sacyr and Gestamo, for 350 million euros each; those of Europac and Elecnor (300 million), those of Masmóvil and Mango (200), those of Vidrala and Tubacex for 150 million euros and those of Pryconsa, Maxam and Hotusas for 100 million. .


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