COVID-19 :

Financial Support measures

10 04 2020

It is important that the employers are aware of the obligations and consequences for employment in your company.  BDO Italy provides you with practical guidelines related to the obligations and opportunities set forth by the recent decrees approved by the Government, especially the “Cura Italia” Decree (Urgent Law-Decree 18/2020 – here below the Decree).

1. Financial support measures for SMEs and support for corporate and employer liquidity:

Based on article 56 of the Cura Italia Decree, micro-enterprises and small and medium-sized enterprises based in Italy might ask banks or other financial institution to postpone/ suspend the repayment until 30 September 2020.

The measure is aimed specifically at micro and small and medium-sized enterprises which, although they do not have deteriorated exposures, have suffered the effects of the epidemic (it is necessary self-certify this requirement) and applies to loans which are beneficiaries of companies that at the date of publication of this decree are not reported by the intermediary in one of the situations that qualify the credit as "impaired" within the meaning of the relevant regulations.

The following article 57 of the Decree entitles:

  1. the banks, with the support of Cassa Depositi e Prestiti S.p.A. (CDP), to provide loans more easily to companies that have suffered a reduction in turnover due to the aforementioned emergency;
  1. CDP, to support banks that provide the aforementioned loans through specific tools such as fund caps and / or portfolio guarantees, including first-loss portfolio guarantees, with respect to the exposures of such banks;
  1. the State to grant "counter guarantees" up to a maximum of 80% of the exposures assumed by CDP and at market conditions, with an evident multiplicative effect of the resources available to the system.

The tool is complementary to the SME Guarantee Fund and the relative implementing decree will define their respective application areas.

2. Measure to support the company’s cash

Article 1 of the Liquidità Decree (her below the Decree) provides for the granting of a SACE guarantee on loans granted to companies based in Italy. The loans have to be granted by banks, national and international financial institutions and, in general, by subjects authorized to exercise credit in Italy.

This guarantee does not depend on the form of financing and the size of the company; however, it cannot exceed the maximum total amount of Euro 200 billion, of which at least 30 billion is intended for small and medium-sized enterprises, self-employed workers and freelancers with VAT number to the extent that they are no longer entitled to access the Guarantee Fund for SMEs .

The release of the guarantee, to be granted by December 31st 2020, is subject to the occurrence of the following requirements:

  1. The duration of the guarantee cannot exceed 6 years;
  2. as of 31 December 2019 the beneficiary company does not qualify as companies in difficulty pursuant to Reg (EU) 651/2014 and its exposure is not said “deteriorated” in the banking system;
  3. The loan does not exceed the greater of the following two parameters measured with regard to the last financial year closed (ie 2019 for companies with fiscal year coinciding with the calendar year): (i) 25% of the turnover derived and (ii) 200% the labor cost incurred. For the purpose of verifying these parameters, the company must cumulate all the loans supported by the SACE guarantee or other public guarantees, received by the company itself or other companies with Italian seat belonging to the same group;
  4. this guarantee covers up to:

     - 90% of the amount financed for companies with a turnover of less than or equal to Euro 1.5 billion and less than 5,000 employees in Italy;
     - 80% of the amount financed for companies with turnover between € 1.5 billion and € 5 billion and with more than 5,000 employees in Italy;
     - 70% of the amount financed for companies with turnover in excess of € 5 billion. and less than 5,000 employees in Italy.

The parameters referred to in letters (c) and (d) must be measured on the turnover derived and on the cost of personnel incurred in Italy. If the company belongs to a group, the parameters will be considered on a consolidated basis.

The guarantee, equal and proportional between guarantor and guaranteed for failure to repay the loan, is at first request, explicit and irrevocable. The same only covers new loans "granted" to companies on a date subsequent to the entry into force of the Decree and guarantees their principal, interest and ancillary charges, bearing in mind that the cost of the financing cannot exceed the cost incurred for similar unsecured transactions.

The guarantee fees vary from a minimum of 25 basis points to a maximum of 200 basis points, depending on the size of the company and the loan amortization plan.

The company forfeits the benefit of the guarantee if:

  • in 2020 the company or other Italian-based company belonging to the same group resolves upon distribution of dividends to shareholders or repurchasing treasury shares or
  • manages employment levels outside agreements with Unions.

It is also the burden of the bank or lender to prove that the bank exposure of the company that accesses the benefit of the guarantee is greater than the bank exposure held by the same company on the date of entry into force of the Decree. The latter must be measured considering all the funding decreases occurred between the parties in compliance with the contractual arrangement or upon borrower’s independent decision.

Finally, the guaranteed loan has a purpose constraint. It must in fact be used to finance personnel costs, investments or working capital needs respectively incurred, made or sourced by manufacturing plants and business activities located in Italy. In support, a certificate from the legal representative of the beneficiary company is required.

Simplified procedures for granting the SACE guarantee are provided for companies with a turnover of less than or equal to Euro 1.5 billion and less than 5,000 employees in Italy while, if the loan exceeds the amount of Euro 375 million and is paid to companies with a turnover and a number of employees exceeding the indicated thresholds, the granting of the guarantee is subject to the acquisition - within 30 days from the preliminary investigation - of the favorable opinion of the Minister of Economy and Finance, after consulting the Minister of Economic Development. This opinion must take in duly account the role plaid by the borrower and, in particular: its contribution to technological development, its belonging to the logistics and supply network, the impact on critical and strategic infrastructures, the impact on the levels employment and labor market and specific weight within a strategic production chain. The favorable opinion of the aforesaid Minister may also remodel the access to the guarantee by raising the measure provided for by letter (d) (i.e. from 70% to 90%) to the immediately higher percentage limit.

The effectiveness of these provisions is subject to the approval of the European Commission under Article 108 of the EU Treaty. Furthermore, the possibility of using the instrument of the ministerial decree is envisaged to regulate further implementation and operative methods and any elements and integrative requirements of the measures in point.


Measure for supporting the cash management

Still in compliance with the overall maximum limit of Euro 200 billion, it is envisaged a further State guarantee on exposures that Cassa Depositi and Prestiti (CDP) has assumed or assumes by 31 December 2020 in the form of a guarantee of bank loans granted to companies based in Italy who suffered a reduction in turnover due to the COVID-19 emergency. The guarantee - at first request, unconditional, explicit and irrevocable - must be granted in ways that allow the lender to grant new loans, considering the regulatory capital released as a result of the guarantee granted.


Measure to support export, internationalization and investments

In order to strengthen the export and internationalization of businesses, the Decree introduces, with article 2, some changes to article 6 of Legislative Decree 269/2003 which governs the operation of SACE's intervention.

A co-insurance system is introduced according to which the commitments deriving from SACE's insurance business, for risks defined as non-market pursuant to European Union legislation, are assumed by the State for 90% and by the same company for the remaining 10%, thus freeing up to an additional Euro 200 billion of resources to be used to enhance exports.