Among the legislative measures approved by the Italian Government to support the financial indebtedness of corporates in the face of COVID19 (which we describe here), the State guarantee made available through SACE S.p.A. ("SACE") is mainly relevant for the loans and capital markets. A recent law has simplified access to this scheme for private lenders which are not cleared to offer loans to Italian customers (we describe the process and requirements for clearance here).
Law No. 40 of 5 June 2020 (the "Conversion Law") has converted into law, with few amendments, the Liquidity Decree (law decree No. 23 of 8 April 2020).
Under article 1, new paragraph 14-bis, until 31 December 2020, SACE can provide guarantees in accordance with EU rules on State aid (and the other criteria provided by the Conversion Law) in favour of banks, national or international financial institutions and other persons which subscribe in Italy bonds or similar debt instruments issued by good-standing Italian enterprises1, with a credit rating (obtained from a primary rating agency) of at least BB- or equivalent.
Paragraph 14-ter further clarifies that in case of a rating lower than BBB-, the initial subscribers of the bond or debt instruments are required to hold a share of at least 30% of that debt issue until maturity.
For bond issues by entities other than banks, national or international financial institutions or others cleared to lend in Italy, the issuer shall deliver to SACE a declaration attesting that as of 29 February 2020 the issuer was not reported as non-performing to the banking system (within the meaning of the EU laws).
The subscribers must appoint a representative to provide SACE with a regular report confirming that the issuer and the subscribers are compliant with all applicable conditions and undertakings.
SACE's capacity to issue such guarantees is limited by the overall amount of EUR 200bn (in aggregate with the other guarantee of the scheme).
For issuance equal to, or higher than EUR 100mln the guarantee can only be issued upon determination of the Ministry of the Economy and Finance (together with the Ministry for the Economic Development) also taking into account the role of the issuer in Italy for, among others, technology, logistics, infrastructure, strategic production, employment levels.
The scope of the amendment intervention of the Conversion Law was clearly meant to expand the applicability of the SACE guarantees also to alternative lenders. The conditions, requirements, monetary limits and procedure to obtain SACE's guarantee for debt note issues reflect closely those set out for loans to corporates. We expect that this development should contribute to the development of private debt in the Italian market, as alternative lenders are afforded an important form for support to corporates affected by COVID19.
1 I.e. enterprises based in Italy, not in 'difficulty', in the meaning of EU rules on State aid as at 31 December 2019, not classified as 'non-performing exposure' pursuant to EU banking rules as at 29 February 2020, and adversely impacted by COVID19