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Companies with losses will be allowed to write-off rebates of ICO(Institute of Official Credit)loans

This agreement enables companies with larger losses to require reductions in ICO credits of up to 75%.


The Council of Ministers of 11/5/2021, reached an agreement between the Government and financial institutions approving the "Code of Good Practices for the renegotiation framework for customers with guaranteed financing provided for in Royal Decree-Law 5/2021", to support business solvency in response to the COVID-19 pandemic.


To do so, banks will have to adhere to this new agreement reached on a voluntary basis. For this reason, only certain financial institutions that have granted ICO loans may be included, as this measure will also involve an effort on the part of the financial institutions granting the financing. They will assume a write-off for the proportional part of the loan that is not guaranteed. In any case, a period of one month is granted to take the decision, which will be made public and they will have to inform their clients of this circumstance.


Measures agreed between the Government and Financial Institutions with respect to the Code of Good Practices and ICO loans


Some of the measures agreed are:


1) Transforming ICO credits into direct aid to companies


This new line offering the restructuring of financial debt with a State guarantee is provided with an amount of 3,000 million euros.

With regard to the write-off of the ICO credits granted, the reduction may be:


  • 50% of the outstanding guaranteed principal of each operation, if the company’s decrease of turnovers or self-employed person in 2020 was less than 70%.

  • Up to 75% of the guaranteed amount if the drop in turnover in 2020 exceeded a percentage of 70%.


However, the financial institutions will have to assume the proportional part of the loan reduction, and the payment of the transfers will be made by order of entry, being limited to the exhaust of the funds established for each of the bodies that have granted guaranteed loans:


  • 2,750 million euros for guarantees managed by ICO (Institute of Official Credit).

  • 100 million for CESCE (Spanish Insurance and Export Credit Company) guarantees.

  • 150 million for guarantees managed by CERSA (Spanish Counter-Guarantee Company).


2) Extension of the maturity of ICO loans with public guarantees


This measure pretends to give more flexibility on the repayment of debts generated during the crisis. The enlargement of a period of allowance of two years, at a first point and the extension for the repayment period to 10 years, as a second facility, are given.


3) Conversion of debt into equity loans


Finally, the possibility of converting guaranteed loans into equity loans, subject to an agreement between the financial institution and the company, while maintaining the coverage of the public guarantee, is feasible. This measure was requested by business associations to help strengthen the beneficiary companies' equity, as these loans are treated as equivalent to capital for commercial purposes.


How can a company benefit from these measures?


In order to take advantage from these 3 measures, the company must have had a drop in turnover of 30% in 2020. Moreover, the profit and loss account for 2020 must show a negative result after tax. In addition to these requirements, the company must not be in delay in any of the financing subscribed with the financial entity and it must not be included in any insolvency proceedings.


In fact, the Executive has clearly shown its intention to help those companies facing greatest difficulties in this health crisis. However, all of this is subject to and controlled by the financial institutions. They will have to join this agreement so as to allow the proposed ICO loan reductions taking place.


Got a question? Our team at Carrillo Asesores will be happy to advise you. Feel free to ask for more information.




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