COVID19 Ireland: Support Extended Credit Guarantee Scheme and New Pandemic Fund

Background

There are a number of tailored supports for all sizes of enterprise in Ireland.  The new CGS is a further development of the existing Credit Guarantee Scheme introduced in 2012, which is already available from AIB, Bank of Ireland and Ulster Bank.
SMEs are defined by EU Regulation 2003/361/EC as enterprises that:

• have fewer than 250 employees;
• have a turnover of €50 million or less (or €43 million or less on their balance sheet);
• are independent and autonomous i.e. not part of a wider group of enterprises;
• have less than 25% of their capital held by public bodies;
• are established and operating in the Republic of Ireland.

However, SMEs involved in primary agriculture, horticulture and fisheries are excluded from the existing scheme.

The New CGS

The new CGS aims to encourage additional SME lending by offering a partial government guarantee to banks against losses on qualifying loans granted to support business changes SMEs need to make in response to COVID-19.
The new CGS will provide an 80% guarantee on lending to eligible SMEs until the end of 2020, for terms between three months and six years.
The banks will be responsible for the other 20%.  The guarantee can be used for a wide range of lending products such as term loans and performance bonds between €10,000 and €1 million that have a maximum term of six years or less.
It will be available to all SME sectors, including primary producers according to the government press release.  Interest rates are stated to be below current market rates.

The PSRF

The PSRF will be deployed through a sub-portfolio within the Ireland Strategic Investment Fund (“ISIF”) a sovereign development fund managed by the National Treasury Management Agency.  It will focus on investing on a commercial basis in large and medium enterprises employing more than 250 employees, or with an annual turnover in excess of €50 million that have been negatively and materially impacted by the pandemic.
ISIF may consider investing below these levels if the enterprise is assessed to be of substantial scale and of significant importance at national or regional level.
The PSRF investment will seek a risk adjusted return and will have the flexibility to invest across the capital structure in a range of instruments from equity to debt and hybrid instruments to allow businesses to access the required capital in the most appropriate form.  Any investment made will need to yield a commercial and economic impact return in line with ISIF’s statutory requirements.  All business sectors are eligible.
The PSRF will, consistent with the ISIF’s general mandate, focus on a “double bottom line” return such that its investment decisions will be measured against both investment returns and economic impact in Ireland.

Applying for the Schemes

Businesses seeking to avail of the new CGS can approach a participating lender.  The exact criteria are not yet available.  The government has no role in the application or decision-making process.
Implementation of the new CGS requires legislation, which is currently being drafted.  This may take some time as a new government has yet to be formed.
In parallel, the Department of Business, Enterprise and Innovation, the Department of Agriculture, Food and the Marine, the Departments of Finance and Public Expenditure and Reform, and the Strategic Banking Corporation of Ireland are working to put in place arrangements to ensure that the scheme is implemented as soon as the legislation is enacted.
For the PSRF, enterprises must be able to demonstrate their business was commercially viable prior to the pandemic and that they can return to viability in the medium to long term and contribute to the Irish economy.  The ISIF asks potentially eligible businesses to contact it and provide general corporate and financial information, a business summary and the COVID-19 impact on its business.

Further Information

If you would like further information, please liaise with your usual Maples Group contact or any of the contacts listed below.