Breaking News: Italian COVID19 Legislation – A Game Changer for Private Debt Funds? | Hogan Lovells


Among the legislative measures approved by the Italian government to support the financial indebtedness of companies in the face of COVID19 (which we describe here), the State guarantee made available by SACE SpA (“SACE“) is mainly relevant for loans and capital markets. A recent law has made it easier to access this scheme for private lenders who are not authorized to offer loans to Italian clients (we describe the process and the requirements for ‘authorisation here).

Law No. 40 of June 5, 2020 (the “Conversion law“) converted into law, with some modifications, the decree on liquidity (decree-law n ° 23 of April 8, 2020).

According to article 1, new paragraph 14-bis, until 31 December 2020, SACE may provide guarantees in accordance with EU state aid rules (and other criteria provided for in the conversion law) in favor of banks, national financial institutions or international organizations and others who subscribe in Italy to bonds or similar debt securities issued by good reputation Italian companies1, with a credit rating (obtained from a primary rating agency) at least BB- or equivalent.

Paragraph 14-ter further specifies that in the event of rating below BBB-, the first subscribers of the bond or debt securities are required to hold a share of at least 30% of this debt issue until maturity.

For bond issues by entities other than banks, national or international financial institutions or others authorized to lend in Italy, the issuer submits to SACE a declaration attesting that as of February 29, 2020 the issuer has not been reported as non-performing to the banking system (within the meaning of EU law).

Subscribers must appoint a representative to provide SACE with a regular report confirming that the issuer and the subscribers comply with all applicable conditions and commitments.

SACE’s capacity to issue such guarantees is limited by the overall amount of 200 billion euros (in total with the other guarantee of the scheme).

For an issue equal to or greater than 100 million euros, the guarantee can only be issued by decision of the Ministry of the Economy and Finance (in collaboration with the Ministry of Economic Development) also taking into account the role of the transmitter in Italy for, among others, technology, logistics, infrastructure, strategic production, employment levels.

The scope of the conversion law amendment intervention was clearly aimed at extending the applicability of SACE guarantees also to alternative lenders. The conditions, requirements, monetary limits and procedure for obtaining the SACE guarantee for debt note issues closely mirror those for corporate loans. We anticipate that this development should contribute to the development of private debt in the Italian market, as alternative lenders are offered an important form of support for companies affected by COVID19.

1 That is to say, companies based in Italy, not in “difficulty” within the meaning of EU state aid rules as at 31 December 2019, not classified as “non-performing exposure” within the meaning of the EU rules. banks in the EU as of February 29, 2020, and impacted by COVID19

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