Next Thursday, June 30, the validity of two support measures for companies that were launched at the beginning of the health crisis will end: the bankruptcy moratorium, which has been extended since it was first approved in March 2020 , and the grace period negotiated with the entities for those who have requested credits guaranteed by the ICO.
As far as the bankruptcy moratorium is concerned, the possibility of a new extension is not ruled out, although the experts are skeptical for two reasons: this measure is usually announced in advance and the last extension was already contested on the grounds that it extended the agony for many insolvent companies.
On July 1, the term begins for the debtor, who with the moratorium is not obliged to file bankruptcy, request this. “It is foreseeable that if contests begin to enter the courts in September, they will skyrocket in the last quarter of the year”, affirms the Deputy Dean of Registrars of Spain, José Miguel Tabarés.
The strong increase in contests is going to take place “because of the economic crisis we are going through, not so much because of the end of the moratorium itself,” he adds. The president of the Registry of Forensic Economists (Refor), Juan Carlos Robles, is of the same opinion: “The economic situation, with an energy crisis that has not occurred in decades, is what is going to greatly increase the number of competitions.”
The reason that the end of the moratorium, if there is no other extension in the few days remaining for it, is not the only reason to trigger the contests is that many insolvent companies, although they could be viable, have already disappeared. A bankruptcy administrator declared that “the economic situation of many of them is so bad that they do not even have funds to pay lawyers to carry out the process.”
The Vice Dean of Registrars states that “the ideal is that the new bankruptcy law was already in force.” Robles, for his part, points out that the pre-bankruptcy mechanisms established in the bill, with professional specialists who help save the company in trouble as much as possible “is revolutionary and can be a brake on the avalanche.”
What happens is that the bill to reform the current bankruptcy law has not yet finished its parliamentary process. Despite having been approved by the Council of Ministers in December and being processed as urgent, it will be this last week of June when the plenary session of Congress approves it. From there it will go to the Senate and then return to the Lower House in July, despite this being a non-working month for plenary sessions. The problem is that the deadline to transpose the European directive on insolvency ends on July 17.
If the law were already in force, “the number of legal insolvencies would decrease by the very spirit of the new Law that seeks anticipation, encourage early restructuring processes of viable companies, avoiding bankruptcy declarations, in order to ensure their continuity. . This will favor the solution through out-of-court settlements, which, in turn, will help alleviate the collapse of the commercial courts”, they say at the insurance company Solunion.
Another business support that also disappears is the grace period for credits guaranteed by the ICO. Officially, this period ended between last March and April since its term was two years (also in one more year). However, in May 2021 the Code of Good Practices was approved, by which the financial entities that adhered could extend the grace period until June 30, 2022 by negotiating with the applicants. It is not a total grace period but depends on each negotiation.
This aid will not go beyond time as the Government has announced that it will ask Brussels for authorization to extend the repayment terms of ICO credits up to eight or ten years but nothing related to the grace period.
Cofides. Companies with a turnover of between 10 and 400 million euros have also been the object of public aid. In 2021, the Fonrec was created, a recapitalization fund for companies affected by Covid-19 managed by Cofides. Likewise, companies with more than 400 million that had not obtained financing from SEPI could benefit from it. These aids end on the 30th. Since December 2021, the number of companies that have benefited from the Forec has not reached 30. The selection of companies has been very strict, rejecting 42 rescues for 455 million euros. Companies that without this aid will find it very difficult to save themselves and will inevitably go bankrupt, as this is their last chance.
Default. According to the Bank of Spain, more than 4% of ICO loans are in default and 22.7% are under special surveillance due to the risk of default at the end of March, which translates into around 19,500 million.
Time frame. On June 30, 2022, the temporary state aid framework approved by the European Commission ends, which allows aid to be granted, in the form of guarantees or similar, to companies affected by the Covid pandemic.