On Thursday 4 March, the European Commission approved a French State guarantee scheme to support the economy in the light of Covid-19. This scheme aims to provide long-term financing for companies and facilitate new investments to support recovery from the current economic crisis.
“By mobilising up to €20 billion support from private investors in the form of participating loans and subordinated debt, the guarantee scheme will help mitigate the economic impact of the coronavirus outbreak by crowding in private investments”, said Margrethe Vestager, Executive Vice-President for Competition.
The State guarantee will cover up to 30% of the portfolio of participating loans and subordinated bonds acquired by the private investment vehicles and is calibrated in such a way that the risk borne by private investors remains limited, in line with a first-class credit rating. Thus, incentivising private investors (such as insurance companies, pension funds and asset management companies) to direct financing to the real economy.
Participating loans and subordinated bonds eligible under the scheme must be issued before 30 June 2022, must be used to finance investments and not pre-existing debt, and must have a maturity of 8 years with a grace period of 4 years on principal repayments. (Original version in French by Lionel Changeur)