For facing this emergency, on 13 March 2020 the European Commission published a communication (available here) aiming at outlining a coordinated economic response at EU level and mitigate the socio-economic consequences of COVID-19, including recommendations on liquidity measures to be taken to facilitate immediate relief to SMEs, through extension and deployment of EU's existing instruments and complementing measures taken at national level.

In Italy, specific measures have been adopted starting from the beginning of March, in order to contain the impact of the COVID-19 outbreak at various levels and sectors of the economy. In this respect, we set out below a summary of the main Italian measures enacted which are relevant for the debt capital market sector and aimed at supporting the economic system, particularly SMEs and families.

Cura Italia Decree

The Italian government has adopted Law Decree No. 18 on 17 March 2020 (Cura Italia Decree) which has been published on the Italian Official Gazette on 17 March 2020 and entered into force on the same day. The Italian version of Cura Italia Decree is available here.

The summary below focuses on the following main provisions enacted by the Cura Italia Decree:

• payment suspension and moratorium for loans granted to SMEs and micro-enterprises;
• extension of the Solidarity fund for "first home" loans (Fondo di Solidarità per i mutui per l’acquisto della prima casa);
• extension of the existing provisions relating to the SMEs central guarantee fund (Fondo Centrale di Garanzia per le PMI);
• measures relating to the support through guarantees granted by Cassa depositi e prestiti;
• tax incentives facilitating the sale of non-performing loans; and
• measures relating to export credit.

Payment suspension and moratorium for loans granted to SMEs and micro-enterprises (Art. 56)

COVID-19 outbreak is expressly recognised as an event causing serious disturbance in the economy, pursuant to article 107 of the Treaty on the Functioning of the European Union.

Micro-enterprises and SMEs with registered office in Italy can benefit from the following financial measures in relation to debt exposures vis-à-vis banks, financial intermediaries (pursuant to Article 106 of Legislative Decree No. 385 of 1 September 1993) and other entities authorised to granting credit in Italy:

1. overdraft facilities and loans granted over discount of receivables outstanding as at 29 February 2020 shall not be revoked or cancelled, in whole or in part, until 30 September 2020;
2. loans with bullet repayments having a maturity falling prior to 30 September 2020 shall be extended until 30 September 2020;
3. payments of instalments and lease payments relating to loans and other financings repayable in instalments (including agricultural bills of exchange ("cambiali agrarie"), including their ancillary elements and without any formality, are suspended until 30 September 2020 without additional or increased charges; enterprises are also allowed to request suspension only with respect of the principal component of the instalments. The relevant amortisation plan shall be deemed to be extended accordingly.

Such measures may only be applied to debt exposures that are not classified as non-performing ("deteriorate") at the date of publication of the Cura Italia Decree.

Banks and financial intermediaries may request the guarantee SMEs' guarantee found up to an amount equal to 33% of the financing granted under points 1, 2 and 3 above on a free of charge basis.

Extension of the Solidarity fund for "first home" loans (Fondo di Solidarità per i mutui per l’acquisto della prima casa) (Art. 54)

For a period of 9 months from the entry into force of the Cura Italia Decree, admission to the solidarity fund for mortgage loans established by the Ministry of economy and finance under Law 244 of 24 December 2007 is extended to self-employed workers and professionals who self-certify a decrease in their turnover of more than 33% in the last quarter of 2019, as a result of the closure or restriction of their activity due to COVID-19.

Extension of the existing provisions relating to the SMEs central guarantee fund (Fondo Centrale di Garanzia per le PMI) (Art. 49)

For a period of 9 months from the entry into force of the Cura Italia Decree, inter alia:

1. the guarantee of the SMEs central guarantee fund is granted free of charge and the maximum guaranteed amount for each enterprise is equal to Euro 5 million;
2. the maximum guarantee rate is increased (80% direct guarantee and 90% reinsurance/counter-guarantee) for the transactions admitted to the fund for an amount up to Euro 1.5 million for each enterprise;
3. loans for debt renegotiation transactions are eligible for the fund guarantee, provided under such renegotiation the beneficiary is granted with additional funding equal to at least 10% of the outstanding amount of the original loan;
4. where a bank or financial intermediary has agreed to a moratorium of interest or principal a as result of COVID-19 in relation to transactions covered by the SMEs central guarantee fund, the duration of the guarantee granted by the SMEs central guarantee fund is extended accordingly;
5. the guarantee may be combined with other form of guarantees securing loans relating to real estate and tourism and/or hospitality sectors investment transactions having a duration of 10 years and an amount higher than Euro 500,000;
6. new financings with a maturity of 18-month minus one day and up to a maximum amount of Euro 3,000 granted to natural persons carrying out business activities, arts or professions are eligible for the fund to the extent directly affected by the COVID-19 outbreak (80% direct guarantee and 90% reinsurance/counter-guarantee). The guarantee is granted free of charge and not subject to credit assessment;
7. the guarantees pursuant to article 39, paragraph 4, of Law Decree no. 201 of 6 December 2011 and the guarantees on minibond portfolios are granted using the available SMEs central guarantee fund's resource;

Further measures to strengthen the financial condition of enterprises, also by way of subsidised rates financings and guarantees up to 90% granted in favour of the enterprises, or the banks or financial intermediaries granting new loans to the enterprises, may be adopted by decree of the Italian Ministry of Economy and Finance in consultation with the Italian Ministry of Economic Development.

Measures relating to the support through guarantees granted by Cassa depositi e prestiti (Art. 57)

In order to support liquidity to the enterprises affected by the COVID-19 outbreak:

1. banks may provide loans more easily to companies that have suffered a reduction in turnover due to the aforementioned emergency, with the support of Cassa depositi e prestiti S.p.A.;
2. Cassa depositi e prestiti S.p.A., shall support banks granting such loans through specific instruments (also in the form of first loss guarantee granted in respect of portfolios or single exposures); and
3. the State shall grant in favour of Cassa depositi e prestiti S.p.A., a counter-guarantee up to a maximum of 80% of Cassa depositi e prestiti S.p.A.'s exposures.

Tax incentives facilitating the sale of non-performing loans (Art. 55)

In order to boost the assignment of non performing loans ("crediti deteriorati") - either of a commercial or financial nature - the Cura Italia Decree allows transforming a portion of deferred tax assets (DTA) into tax credits (whether or not they are recorded in the financial statements) for an amount proportional to the value of the non performing loans that are transferred to third parties.

For benefitting of such incentives, the assignment shall be made by 31 December 2020.

Measures relating to export credit (Art. 58)

The Cura Italia Decree envisages the suspension of repayments of the instalments due in 2020 of loans ("finanziamenti agevolati") of the "fund 394" managed by Simest S.p.A. and aimed at supporting the internationalisation of exporting enterprises.

Other measures enacted in Italy

The following measures have been enacted before the entry into force of the Cura Italia Decree. These measures are also summarised in the dossier published by the Italian Civil Protection available here.

Addendum to the Accordo per il Credito 2019

The Addendum to the Accordo per il Credito 2019 (Italian version available here) has been entered into between the Italian Banking Association (ABI) and some associations (such as, inter alia, Coldiretti, Confindustria, Confcommercio, Confesercenti and Confartigianato) on 6 March 2020 in order to support SMEs affected by the aforementioned health emergency (the Addendum).

Such Addendum envisages, inter alia, the possibility of extending the maturity of the loans (the so-called "Imprese in Ripresa 2.0") set out in the Accordo per il Credito 2019.

Decree Law No. 9 of 2 March 2020

The Decree Law No. 9 of 2 March 2020 (Italian version available here) sets out certain measures aimed at limiting the occurrence of significant disruptions to the financial system, in particular with respect of those municipalities (as identified in such Decree) which were initially put under lockdown due to the widespread of COVID-19 in such areas. In particular:

1. the terms relating to the fulfillment and payment of social security and welfare contributions and premiums for compulsory insurance expiring in the period from 23 February 2020 to 30 April 2020 are suspended in the municipalities identified in Annex 1 to the Presidency of the Council of Ministers Decree of 1 March 2020 (PCMD);
2. beneficiaries of the loans granted by Invitalia - Agenzia nazionale per l'attrazione degli investimenti e lo sviluppo d'impresa S.p.A. ("mutui agevolati") in favour of enterprises with headquarters or local units located in the territories of the municipalities identified in Annex 1 to the PCMD, may benefit from a twelve month suspension of the payment of installments falling due no later than 31 December 2020 and a corresponding extension of the amortisation plans;
3. for a period of twelve months from the date of entry into force of the Decree Law No. 9 of 2 March 2020, the guarantee of the fund referred to in Article 2, paragraph 100, letter a), of Law no. 662 of 23 December 1996 (guarantee fund for small and medium enterprises), is granted to SMEs, including those in the agri-food sector, with headquarters or local units located in the territories of the municipalities identified in Annex 1 to the PCMD, on a free of charge basis and with priority over other interventions, for a maximum guaranteed amount per single enterprise of Euro 2,500,000. For direct guarantee operations, the maximum coverage percentage is 80% of the amount of each financing operation. For reinsurance operations, the maximum percentage of cover is 90% of the amount guaranteed by the Confidi or other guarantee fund, provided that the guarantees issued by the latter do not exceed the maximum percentage of cover of 80%;
4. the resources of the revolving fund referred to in Article 2, first paragraph, of Decree-Law No. 251 of 28 May 1981, converted, with amendments, by Law No. 394 of 29 July 1981, is increased by Euro 350 million for the year 2020;
5. in order to ensure the economic recovery and productivity for agricultural enterprises located in the municipalities identified in Annex 1 to the PCMD, which have suffered direct or indirect damage due to the COVID-19 outbreak, interest-free loans for a period not exceeding fifteen years shall be granted for the purpose of extinguishing bank debts outstanding at 31 January 2020.

Order of the Head of the Civil Protection Department No. 642 on 29 February 2020

Pursuant to the Order of the Head of the Civil Protection Department No. 642 (Italian version available here) the borrowers of mortgage loans relating to buildings located in the municipalities identified under Annex No. 1 to the Presidency of the Council of Ministers Decree of 23 February 2020 (the municipalities listed thereunder are the same as those provided for in Annex 1 to the PCMD), or strictly connected with the management of commercial, economic and agricultural activities where the headquarters are located in the same municipalities, have the right to request to credit institutions and banks, upon presentation of a self-certification indicating the damage suffered due to the COVID-19 outbreak, to suspend the installments of the same loans, until the state of emergency has ceased, opting between the suspension of the entire installment or the suspension of the capital component only.

Within thirty days of the date of entry into force of the Order of the Head of the Civil Protection Department No. 642, banks and financial intermediaries shall inform the borrowers of the possibility of requesting such suspension (in accordance with the Agreement of 18 December 2009 between the Italian Banking Association and the consumers Associations) and shall set a deadline (not less than thirty days) for the exercise of such suspension right. If the bank or financial intermediary does not provide such information, the relevant installments due will be in any case suspended until 14 November 2020, without additional costs for the borrower.

We will provide you with further updates on the implementation of the European and national legislative framework.

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