The wide ranging package of measures announced by the French Government over the last few days to support businesses in the context of the COVID-19 pandemic is progressively being implemented.
Among these measures is a EUR 300 billion State guarantee scheme for new loans granted by financial institutions to French businesses between 16 March 2020 and 31 December 2020 (the “State Guarantee”). BPI Financement will manage the State Guarantee scheme on behalf of the French State.
The key features and conditions of this State Guarantee have been defined on 23 March 2020 in a law amending the 2020 finance act (law No.2020-289) (the “Amending Finance Act”) and a decree (arrêté) of the French Economy and Finance Minister (the “Decree”). This scheme was previously notified as a State aid scheme by the French Government to the European Commission on 17 March 2020 and approved by the latter on 21 March 2020.
This update sets out the key features of this scheme.
Legal entities and sole traders are eligible for the State Guarantee provided that they are registered with the national business identification and directory system (SIRENE).
The following companies are however excluded:
Companies held by private equity funds should be eligible for the State Guarantee.
Loans eligible for the State Guarantee must meet the following criteria:
The loan agreement can provide for the automatic acceleration of the loan should the lender discover that the borrower of the loan was not eligible for the State Guarantee, in particular as a result of incorrect information given by the borrower.
The total amount of State guaranteed loans that can be granted to one business cannot exceed the following caps:
The State Guarantee will be available for a total amount of loans (in principal, interest and ancillary costs) of EUR 300 billion.
For each eligible loan, the extent and duration of the State Guarantee are as follows:
Percentage of guaranteed outstanding loan (in principal, interest and ancillary costs)
Indemnifiable base to which the guaranteed percentage will apply
The indemnifiable amount to which the percentages mentioned above will apply corresponds to the loss acknowledged by the lender as a result of the occurrence of a credit event, defined as the out-of-court or judicial restructuring of the loan or in relation to the borrower’s insolvency proceedings, and after possible amicable or court-based credit collection steps.
The Decree provides the following guidelines to determine the indemnifiable amount:
The general rules set out above will require clarifications in the coming days and weeks as the State Guarantee is likely to be enforced in a wide range of scenarios.
Effective date and duration of the State Guarantee
The State Guarantee gives rise to a fee determined in the Decree and payable by the borrower at the onset of the loan and again if the borrower decides to extend the amortisation schedule of the loan.
Companies with fewer than 5,000 employees or a revenue of less than EUR 1.5 billion in the last financial year
The State Guarantee will be granted through a fast-track process including the following steps:
Companies with more than 5,000 employees and a turnover of more than EUR 1.5 billion
The State Guarantee will be granted upon completion of the following process:
For any question, please send an email to: [email protected]
The Bird & Bird Restructuring & Insolvency team
Last reviewed: 27 March 2020
[1] It is worth noting that the notion of distressed businesses in the Amending Finance Act and Decree of 23 March 2020 is different from that mentioned in the French State aid notification to the European Commission, which refers to the definition of distressed businesses set in Article 2(18) of Commission Regulation (EU) No 651/2014 of 17 June 2014. Early feedback from the market suggests that BPI Financement will refer to EU Regulation No 651/2014 to determine businesses’ eligibility to the State Guarantee.