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The extensions of the shortcomings of the ‘ICO credits’ will only serve 11% of the companies that requested them

These grace periods -in which the companies only have to pay the interest on the loan, not the installments- were to be finished throughout the second quarter, although the Executive has allowed the companies of the four sectors who considers that they are hardest hit by high energy prices may request a new extension of six months.

These four sectors are agrarianthe rancherthe fishing and the ground transport and, according to data from Official Credit Institute (ICO), less than 70,000 companies of the total that requested credits guaranteed by the State belong to them. This figure represents around 11% of the entire universe of companies that have been in need of this financing, which exceed 600,000.

8.5% of the amount

In total, the bank and the ICO have granted 122,122.6 million euros in this type of state-guaranteed loan and, of that amount, 8.5% corresponds to these four sectors. Specifically, 4.5% has gone to the agricultural, livestock and fishing sector (5,535.4 million) and 4% to transport and logistics (4,890.9 million) -logistics companies will not be able to request deficiencies, but the ICO does not disaggregate its data from those of transport.

Any company in these sectors may request a deficiency even if they have not requested any at the moment. As for the rest of the companies, although they are seriously affected by the health restrictions of the pandemic and have not yet recovered their volume of activity, such as the tourist onesthey will not be able to request a new deficiency, so this second quarter they will have to start repaying the credit.

As the new deficiency is limited to four sectors “it is not a coffee for everyone”, he explains to this newspaper Agustin RodriguezCEO of Pfsalthough it warns that “there may be companies affected by the waves of Covid, high energy prices and supply problems, that they are viable businesses in the long term and that are excluded“.

The Government has opened the possibility for them to ask the banks for a loan maturity extensionsomething that until now was reserved for companies that had experienced a 30% drop in their turnover between 2019 and 2020.

The First Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calviño, speaks at a press conference after the Council of Ministers on March 29, 2022.

Europa Press

They must do so within the framework of the Code of Good Practices that the Government designed months ago to give debt restructuring options to holders of ICO credits and to which Practically the entire bank adhered. This framework of three way out to this situation: extension of the due date, conversion of the credit into a participating loan or debt relief. As EL ESPAÑOL-Invertia already reported, companies are practically not resorting to these options.

Until now, the majority option for these companies had been the request for deficiencies and, in fact, they have this Grace period companies that requested credits with guarantees for about 60 billionaccording to the report Banking Union, a climate of changeproduced by PwC. This amount represents around half of the total granted by the bank and the ICO (122,122.6 million euros).

unviable companies

And, on the contrary, there may be unviable companies that find in these new shortages a ball of oxygen to continue surviving when they really are not sustainable in the long term. If it hadn’t been practically mandatory for entities -the new shortages are linked to the Code of Good Practices to which almost the entire banking sector subscribes – banks would have been able to analyze which companies need them and which do not regardless of their sector.

These measures have been welcomed in the financial sector in that they will give flexibility to some companies. However, it is true that the fact that all companies in these sectors must be granted a compulsory grace period can give air to companies that are not really viable.

Since the start of the pandemic the Bank of Spain has been warning banks of the need to identify this type of company well in order to avoid a “zombification”. Also from the European Union They have pointed out that it is better to drop unviable companies to protect those that can get ahead and, of course, financial stability.

All in all, uncertainty persists about the fate of the companies that received state-guaranteed loans. This is so because the end of the shortages in sectors other than agriculture, livestock, fishing and land transport, which will take place before the summer, will coincide with the end of the bankruptcy moratorium.

A closed bar in Linares (Jaén).  Numerous businesses have closed since March.

A closed bar in Linares (Jaén). Numerous businesses have closed since March.

Marcos Moreno

In principle, this will come to an end on June 30, 2022, so a wave of declarations of insolvency proceedings is expected in the recovery sector if nothing changes before. And, with it, a greater saturation of the courts.

The end of the insolvency moratorium, together with the general rise in prices -which many companies cannot afford- and the end of shortages in all sectors other than agriculture, livestock, fishing and transport push many companies to a sort of “perfect storm” It remains to be seen how it will end.

Not in vain, before knowing these latest measures, from Pfs they estimated that Between 8% and 12% of companies with ICO credits they could go into default next quarter.

Banks ready

A year ago, the experts at Alvarez&Marsal estimated that, thanks to the provisions generated during the pandemic, banks are prepared to assume a delinquency of up to 7%as reported by EL ESPAÑOL-Invertia.

In the aforementioned PwC report, published this week, the conclusion was similar. And it is relevant because this level was more or less the level that experts predicted that non-performing loans could reach this year.

“In the financial sector it is believed that in Spain there may be a rebound of between one and two points, up to around 6%, although if it reached 7% it wouldn’t be a drama eitherbecause the extraordinary provisions made so far by the banks come to cover this rate of defaults”, PwC experts point out in this study in relation to delinquency.

Entities have been increasing the volume of loans they have on special surveillance, that is, those that have not yet been defaulted, but whose risk has increased since the loan was granted. At the moment, in any case, they have not observed a rebound in delinquency, although it will take place throughout the year. The measures put in place last Tuesday will try to avoid this, but at the moment great uncertainty surrounds this issue.

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