On 7 April 2020, SACE S.p.A. (Italy's ECA) and ABI (the Italian Banking Association) have formed a taskforce to address COVID-19 and Government support for Italian businesses. On 20 April 2020, the Italian Banking Association and SACE S.p.A. have published guidelines (the "Guidelines") setting out the formalities to implement the State guarantee (the "SACE Guarantee"), in accordance with article 1 of law decree No. 23 of 8 April 2020 (the "Liquidity Decree"). The Guidelines are based on the conditions laid out in the Liquidity Decree, as summarised here.
The cover is available for new loans granted from 9 April 2020 until 31 December 2020, but the scheme is limited to the capacity of EUR 200bn set aside under the Liquidity Decree. EUR 30bn of this total are reserved for SMEs, and the incentive is allocated on a first come-first served basis.
The maximum terms of eligible loans remains set at six years, and loans must be paid in one utilisation, on a dedicated bank account. The purpose remains limited to financing operations in Italy, and the Guidelines specify further that the loans cannot be used to refinance existing loans, repurchase own stock, or finance acquisitions.
To accede, lenders must register on SACE's online platform. The process starts with the borrower's application to the participating lender. The lender submits the application to SACE after its own credit approval. Each loan admitted to benefit from a SACE Guarantee is assigned a unique identifier (CUI), and the cover takes upon payment of the loan to the borrower.
For loans in excess of EUR 375m, and borrowers with a turnover of EUR 5bn or more or 5,000 employees or more, the SACE Guarantee requires a prior decree of the Ministry of the Economy and Finance. In this case the lenders must inform SACE immediately of each application, before completing their own credit review.
The fees payable for the SACE Guarantee are set at the minimum rates permitted under the EU Commission's Temporary Regime, although the subsidy is clawed back if the requirements and conditions for eligibility are breached, and SACE is entitled to full market rates for its Guarantee in this case.
The cover works as a risk transfer mechanism, meaning that SACE shares credit risk pari passu with the lenders, and pro-rata in proportion with the percentage (usually 70% to 90%) of the available cover. The Guidelines confirm that SACE benefits as a matter of law from all security and guarantees afforded to the lenders in respect of eligible loans.
SACE's indemnity is payable to the lender in case of the borrower's default, although SACE is not bound by acceleration of the loan and may pay its contribution in accordance with the original repayment schedule. The SACE Guarantee extends to amounts paid to a lender and then set aside or clawed back under the insolvency law.
The lenders may assign a SACE Guarantee only to a bank or financial institution licensed to lend in Italy, a Central Bank or the European Investment Bank, by use of the forms attached to the Guidelines.
In general, we have covered the impact of coronavirus on loans in Italy more widely here.