This commentary includes our observations on the application of the French COVID-19 Government Guarantee scheme to infrastructure businesses.

We have considered the application of this scheme to infrastructure businesses and have the following structural observations:

• The scheme operates so that the State provides a guarantee of the debt owed by a borrower to a financial institution that is willing to provide new commitments or increase its existing commitments. The scheme is administered by a public bank –
  Bpifrance Financement SA (BPI). In the case of a borrower payment default BPI will pay to such financial institution between 70% and 90% of the amounts unpaid by the borrower, such percentage being dependent on the size of the borrower (please refer to the above article for details on how percentage is determined). BPI will be acting only as an administrator of the scheme and any payments it makes will be from the funds provided by the State.
• This scheme can be accessed only by borrowers registered with a French trade and company register (i.e., able to provide the related SIRENE identification number). This requirement should be easy for most infrastructure businesses to meet, given that they largely operate through an SPV registered in the jurisdiction where the assets are located. Alternatively, French branches of foreign entities may be able to apply, but this is uncertain.
• Only loans from financial institutions registered in France are eligible for the guarantee protection, so borrowers will need to liaise with their preferred French financial institution. It is possible for foreign institutions duly licensed in an EU member state and working through passporting to apply. Therefore, depending on a fund setup, liquidity lines that could potentially be mobilized from debt and equity funds may not be eligible for protection under this scheme.
• Financial indebtedness in the form of notes or bonds is not eligible for protection. It is also not clear to what extent any more complex instruments, like convertible loans, may be eligible for cover, and this requires further clarifications from BPI.
• Only new or increased commitments are eligible for protection.
• Only unsecured and otherwise unguaranteed loans are covered by the scheme, so it will not be possible to increase existing commitments that are secured or guaranteed. Borrowers will need to ensure that the additional debt falls within the unused permitted indebtedness baskets under their existing financings, or seek an increase to the baskets. We are exploring whether BPI would accept a position where the bank providing fresh commitments agrees to a standstill or subordination of their claims and enforcement rights against the borrower and its group entities to those of senior secured creditors.