Resolution of 6 May 2020 establishing terms for the third tranche of state guarantee lines for loans, MARF promissory notes, and CERSA re-guarantees

I. GENERAL PROVISIONS
MINISTRY OF ECONOMIC AFFAIRS
AND DIGITAL TRANSFORMATION
4903 Resolution of 6 May 2020, from the State Secretariat for Economy and Business Support, publishing the Agreement of the Council of Ministers of 5 May 2020, establishing the terms and conditions of the third tranche of the guarantee line for loans granted to companies and self-employed individuals, promissory notes incorporated into the Alternative Fixed Income Market (MARF), and re-guarantees granted by the Spanish Re-guarantee Company, SME, Public Limited Company (CERSA), and authorizing limits to acquire expenditure commitments for future fiscal years in application of Article 47 of Law 47/2003, of 26 November, General Budgetary Law.

The Council of Ministers, in its meeting on 5 May 2020, adopted an Agreement establishing the terms and conditions of the third tranche of the guarantee line for loans granted to companies and self-employed individuals, promissory notes incorporated into the Alternative Fixed Income Market (MARF), and re-guarantees granted by the Spanish Re-guarantee Company, SME, Public Limited Company (CERSA), and authorizing limits to acquire expenditure commitments for future fiscal years in application of Article 47 of Law 47/2003, of 26 November, General Budgetary Law.

For the purpose of giving publicity to the aforementioned Agreement of the Council of Ministers of 5 May 2020, this State Secretariat for Economy and Business Support has resolved to order its publication in the "Boletín Oficial del Estado" as an annex to this Resolution.

Madrid, 6 May 2020.–The State Secretary for Economy and Business Support, Ana de la Cueva Fernández.

ANNEX
The Council of Ministers
AGREES

1. To establish, in accordance with Article 29 of Royal Decree-Law 8/2020, of 17 March, on urgent extraordinary measures to face the economic and social impact of COVID-19, as amended by Royal Decree-Law 15/2020, the applicable conditions and requirements to be met, detailed in Annex I, for the third tranche of the guarantee line amounting to 20,000 million euros, granted by the Ministry of Economic Affairs and Digital Transformation. Through this third tranche, the Ministry of Economic Affairs and Digital Transformation will guarantee the financing granted to companies and self-employed individuals by credit institutions, credit establishments, electronic money institutions, and payment institutions to mitigate the effects on their activity as a consequence of COVID-19. The guarantees of the Ministry of Economic Affairs and Digital Transformation will be managed through the Official Credit Institute (ICO) under the terms provided in this Agreement.

2. To establish, in accordance with Article 29 of Royal Decree-Law 8/2020, of 17 March, on urgent extraordinary measures to face the economic and social impact of COVID-19, as amended by the fourth additional provision of Royal Decree-Law 15/2020, of 21 April, on urgent complementary measures to support the economy and employment, the applicable conditions and requirements to be met, detailed in Annexes II and III, for the tranche of the line for re-guarantees granted by the Spanish Re-guarantee Company, S.M.E., Public Limited Company (hereinafter CERSA) amounting to 500 million euros, and for the tranche of the guarantee line for promissory note issuances incorporated into the Alternative Fixed Income Market (MARF) amounting to 4,000 million euros, granted by the Ministry of Economic Affairs and Digital Transformation, to mitigate the effects of COVID-19. The guarantees of the Ministry of Economic Affairs and Digital Transformation will be managed with the collaboration of the Official Credit Institute under the terms provided in this Agreement.

3. The amounts corresponding to losses arising from the execution of the guarantees described in Annexes I, II, and III, as well as the management and administration expenses of the Official Credit Institute for the guarantees, shall be covered from the budgetary item established for this purpose by the Ministry of Economic Affairs and Digital Transformation, in accordance with the terms indicated in the annexes of this Agreement and the authorization of limits to acquire expenditure commitments for future fiscal years contained in Annex IV of this Agreement.

4. To empower the Official Credit Institute to resolve, within the scope of its competencies and through its competent bodies, any practical issues that may arise for the execution of this guarantee line and throughout the validity of the operations. In those matters that may have budgetary implications or affect its financial balance, the Official Credit Institute may make the corresponding proposals to the Government Delegate Commission for Economic Affairs for their consideration.

5. To mandate CERSA, Bolsas y Mercados Españoles Renta Fija, S.A.U., as the governing company of the MARF market, the Official Credit Institute, and the Secretary General of the Treasury and Financial Policy, to take the necessary measures within twenty days following the adoption of this Council of Ministers Agreement to effectively launch the respective tranches of the guarantee line.

6. To authorize the Official Credit Institute to charge against the Provision Fund created by Royal Decree-Law 12/1995, of 28 October, on urgent measures in budgetary, tax, and financial matters, the losses from the execution of the guarantees, as well as the financial costs and management and administration expenses incurred by the Official Credit Institute for the implementation of the guarantee line on behalf of the Ministry of Economic Affairs and Digital Transformation.

7. Regarding compliance with State aid regulations, this tranche of the guarantee line, like the previous tranche approved by Council of Ministers Agreement of 10 April 2020, is configured in conformity with the Temporary Framework for Member States to introduce measures or derogations to support the economy in the current outbreak of COVID-19, approved by the European Commission in Decision SA.56851 (2020/N) of 2 April.

EXPLANATORY STATEMENT

Royal Decree-Law 8/2020, of 17 March, on urgent extraordinary measures to face the economic and social impact of COVID-19, establishes a series of measures to preserve the normality of financing flows and levels of working capital and liquidity, thereby contributing to companies and self-employed individuals continuing to pay employee salaries and supplier invoices, maintaining economic activity. Among these measures, Article 29 of this law provides for a guarantee line with a maximum amount of 100,000 million euros, contributed by the Ministry of Economic Affairs and Digital Transformation to cover financing granted by financial entities to companies and self-employed individuals. To date, 40,000 million euros in released guarantees have been made available to companies and self-employed individuals through separate Council of Ministers Agreements of 24 March and 10 April 2020. Seventy-five percent of these guarantees have been directed towards covering the liquidity needs of SMEs and self-employed individuals, as they are considered the economic agents most in need. Given the good functioning of this guarantee system, this Agreement releases an additional 10,000 million euros for SMEs and self-employed individuals and another 10,000 million euros for companies that do not qualify as SMEs, in line with what is established in Annex I. The annex clarifies some of the obligations of financial entities to ensure proper use of the line.

Royal Decree-Law 15/2020, of 21 April, also provides that promissory notes incorporated into the Fixed Income Market of the Association of Financial Asset Intermediaries (AIAF) and the Alternative Fixed Income Market (MARF) may benefit from the guarantees. Thus, not only is access to liquidity through traditional banking channels encouraged, but also through capital markets. This Agreement provides for up to 4,000 million euros in guarantees for promissory note issuances taking place after the publication of this Agreement and until 30 September 2020, provided that the issuance is carried out under a promissory note program incorporated into MARF on the date of entry into force of Royal Decree-Law 15/2020, of 21 April, in line with what is established in Annex II.

Annexes I and II clarify some of the obligations that beneficiary companies and self-employed individuals of state guarantees must also meet. In particular, and considering that the configuration of the ICO lines prevents companies with their headquarters in tax havens from benefiting, emphasis is placed on using the guaranteed financing exclusively to meet the company's liquidity needs, without using funds for other purposes such as dividend payments.

In order to continue supporting SMEs, Royal Decree-Law 15/2020, of 21 April, on urgent complementary measures to support the economy and employment, provides for a reinforcement of the re-guarantee granted by CERSA, thereby increasing the guarantee capacity of the Mutual Guarantee Societies, present in all Autonomous Communities of Spain and with great reach as enhancers of access to financing for SMEs in the various geographical areas where they are present. Through this Royal Decree-Law, a guarantee is granted to CERSA for an amount of 500 million euros, as established in Annex III.

ANNEX I
The applicable conditions and requirements to be met are as follows:

First.
All conditions and terms provided in the Council of Ministers Agreements of 24 March and 10 April 2020, including their annexes, shall be understood to apply also to this third tranche, with no additional procedures required for this Council of Ministers Agreement.

Second.
Additionally to the above, the following conditions are established, which will be incorporated into the framework contract formalized by the entities with ICO.

Total amount of the third tranche of the guarantee line: Up to 20,000 million euros, contributed by the Ministry of Economic Affairs and Digital Transformation for renewals and new loans granted to self-employed individuals and companies.

Amount by sub-tranches of the guarantee line:

• Up to 10,000 million euros for renewals and new loans granted to self-employed individuals and SMEs.
• Up to 10,000 million euros for renewals and new loans granted to companies that do not meet the condition of SME.

Deadline for requesting guarantees: The guarantees of this third tranche may be requested until 30 September 2020. The deadline may be extended, always in line with EU State Aid regulations, by Council of Ministers Agreement.

Rights and obligations of financial entities:
Financial entities may not charge any financial cost or expense on amounts not drawn by the client.
Entities must comply with all requirements established in the Council of Ministers Agreements and the Framework Contract with ICO and its addenda, without prejudice to the eventual consideration of their material breaches as infractions for the purposes of discipline of financial entities.

Obligations of beneficiary companies and self-employed individuals:
The financing obtained must be used to meet liquidity needs derived, among others, from invoice management, payment of payroll and to suppliers, need for working capital, and maturity of financial or tax obligations. Therefore, by way of example, the financing guaranteed by the State may in no case be destined for the payment of dividends or interim dividends.

Third.
The distribution of the guarantee line among operators will be carried out in accordance with the same criteria established in the Council of Ministers Agreement of 10 April for the second tranche, although for this third tranche the distribution of the maximum assigned volume will be valid until 30 June. From that date onwards, the guarantee amounts assigned and unused by the entities will be distributed among the remaining operators, proportionally to the guarantee amount they would have used up to that date.

ANNEX II
Guarantees to issuing companies in MARF
The applicable conditions and requirements to be met are as follows:

Definitions and purpose
Definition of beneficiary company:
Beneficiary companies shall be considered those non-financial companies that have their registered office in Spain and that, upon the entry into force of Royal Decree-Law 15/2020, of 21 April, on urgent complementary measures to support the economy and employment, had valid promissory note programs incorporated into the Alternative Fixed Income Market (MARF) and that are not in a situation of company in crisis as established in paragraph 18 of Article 2 of Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty. In particular, companies issuing the guaranteed promissory notes may not be subject to insolvency proceedings as of 17 March 2020, either by having filed a request for declaration of insolvency, or by meeting the circumstances referred to in Article 2.4 of Law 22/2003, of 9 July, Insolvency, for the insolvency to be requested by their creditors.

Purpose:
To promote the maintenance of liquidity sources provided by capital markets and not only through traditional banking channels.

Amounts of the first tranche
Total amount of the first tranche of the guarantee line: Up to 4,000 million euros, contributed by the Ministry of Economic Affairs and Digital Transformation.

Eligible promissory notes
Characteristics of eligible promissory notes:
Promissory notes issued in the Alternative Fixed Income Market MARF by non-financial companies that have their registered office in Spain, provided that:
– They are issued in accordance with a promissory note program incorporated into the Alternative Fixed Income Market (MARF) by companies that had a valid promissory note program in the MARF on the date of entry into force of Royal Decree-Law 15/2020, of 21 April, on urgent complementary measures to support the economy and employment.
– They are issued after the adoption of this Agreement and the corresponding signing of the guarantee contract, and no later than 30 September 2020.

Maximum guarantee amount per company:
The maximum guarantee amount per company may not exceed the amount of the promissory note program incorporated into MARF valid on the date of entry into force of Royal Decree-Law 15/2020, of 21 April.

Maximum percentages, remuneration, deadlines for formalization and maximum maturity of the guarantee Maximum guarantee percentages:
– The guarantee amount for each of the promissory note issuances of each issuer shall be a maximum of 70% of the amount of each issuance.

Remuneration of the guarantee:
The remuneration of the guarantees shall be:
– 30 basis points annually on the guaranteed amount for promissory notes with a maturity of up to 12 months.
– 60 basis points annually on the guaranteed amount for promissory notes with a maturity greater than 12 months and up to 24 months.

Deadline for requesting guarantees and monitoring:
Guarantees may be requested until 30 September 2020. The deadline may be extended, always in line with EU State Aid regulations, by Council of Ministers Agreement.
Programs registered in MARF must include the guarantees granted within this line after the signing of the corresponding guarantee contract.

Maximum maturity of the guarantee:
The term of the issued guarantee shall coincide with the maturity term of the guaranteed promissory note, up to a maximum of 24 months.

Rights and obligations of issuing companies
Rights and obligations of companies:
– To demonstrate, through the placing entities, to Bolsas y Mercados Españoles Renta Fija S.A.U. within the scope of its competencies as the governing company of the MARF market, and to ICO, compliance with the requirements, conditions, and limits established in this Council of Ministers Agreement as a non-financial issuer of promissory notes and compliance with the conditions and limits of each issuance seeking to benefit from the guarantee, in accordance with the applicable regulations in each case. Companies or placing entities may request from Bolsas y Mercados Españoles, S.A.U. any information they deem necessary regarding the effective incorporation into MARF of the guaranteed promissory note issuances. – To ensure in their guaranteed promissory note issuances that, in all cases and without exception, the applicable jurisdiction shall be Spanish. – To collaborate with the ICO and with Bolsas y Mercados Españoles Renta Fija S.A.U. as the governing company of the MARF market for the proper conduct of the operations. – To use the financing obtained to meet liquidity needs derived, among others, from payment of payroll, management of supplier invoices, need for working capital, and maturity of financial or tax obligations or other liquidity needs. Therefore, by way of example, the financing guaranteed by the State may in no case be destined for the payment of dividends or interim dividends. – Not have their headquarters in tax havens.

Financial relationships between issuing companies and promissory note holders and the ICO ICO relationships with beneficiary companies:
The ICO and Bolsas y Mercados Españoles Renta Fija S.A.U. as the Governing Society of the MARF market will sign a Framework Contract with each of the beneficiary companies and the placing entities participating in the promissory note issuance programs seeking to have the guarantee, in which the conditions governing the relationships between the parties, the functions of each participating party according to what is established in this Council of Ministers Agreement, will be set.

ICO relationships with holders of guaranteed promissory notes:
The ICO will pay, if applicable, to the holders of the promissory notes the amounts corresponding to executed guarantees through the system agreed with Bolsas y Mercados Españoles Renta Fija S.A.U. as the Governing Society of the MARF markets, for which identification of the same will be necessary.
The administrative management of the guarantee and recoveries in case of execution will be carried out in accordance with the procedure to be established by the ICO with all participating parties in the Framework Contract for guarantees.
If the issuance involves ICO as an investor, the scheme provided in this Agreement will be applicable to ICO's participation under the same conditions.

ICO management and administration commissions:
Management and administration commission: 0.05% flat, calculated on the volume of guaranteed portfolio.

Payment of guarantee remuneration:
Companies will pay the ICO, through the system agreed with Bolsa y Mercados Españoles Renta Fija S.A. as the governing society of the MARF markets, the amounts derived from the remuneration of the guarantee. The ICO will in turn transfer these amounts, as well as the recoveries of amounts related to guaranteed promissory note issuances, to the Provision Fund approved by Royal Decree-Law 12/1995.
The ICO will charge the Provision Fund the amounts corresponding to the management and administration commission in the fiscal year in which they accrue.
If, after 2023, following payment by the Ministry of the last certification sent by ICO, recoveries occur, the ICO will deposit into the Treasury, in January of the following fiscal year, the amounts it has received from companies in the immediately preceding year corresponding to unpaid operations for which the Ministry has previously paid the guarantee.

Restitution of the Provision Fund Royal Decree-Law 12/1995:
The Ministry of Economic Affairs and Digital Transformation will annually or whenever necessary to maintain a positive balance, restore the amounts that have been charged to the Provision Fund 12/1995 in execution of the guarantees and the management and administration expenses and costs of the guarantee. The restitution procedure will be similar to that provided in other recent Agreements with adaptations to what is provided in this Chapter of this Royal Decree-Law and references shall be understood to be made to the reference Ministry of the guarantee. In the first quarter of each of the fiscal years 2021 to 2027, the amounts committed for "ICO guarantee restitution" and "administration cost" may be reviewed, prior to certification by the ICO of the outstanding balance as of 1 January of each fiscal year of the guaranteed operations.

Other procedures, monitoring of the line and authorizations Monitoring of the line:
The ICO, with the collaboration of Bolsas y Mercados Españoles Renta Fija S.A.U. as the governing company of the MARF market, will inform the Ministry of Economic Affairs and Digital Transformation monthly of the use and monitoring of the guarantee line.

Other procedures: No additional procedures are required for this Council of Ministers Agreement.

State Aid
State Aid:
The line is subject to European Union State aid regulations.

ANNEX III
Guarantees to CERSA
Definitions and purpose
Purpose:
To facilitate the maintenance of employment and mitigate the economic effects of COVID-19, the guarantee line aims to support the work carried out by the Spanish Re-guarantee Company, SME Public Limited Company (CERSA), consisting in re-guaranteeing or partially covering the risk assumed by the Mutual Guarantee Societies for small and medium-sized enterprises, thereby favoring the granting of credit that allows them to meet financing needs derived, among others, from payments of salaries, invoices, need for working capital...