The Government Eases Conditions for Companies to Access the Cofides Rescue Fund

The Council of Ministers has approved a relaxation of the eligibility criteria for the COVID-19 Affected Companies Recapitalization Fund (FONREC), managed by Cofides. This change aims to enable a larger number of companies to benefit from these resources.
According to Cofides, the modifications approved on December 7 will benefit not only new applications but also previously submitted applications that were unable to access financing under the old criteria. The ultimate goal is to support and finance as many companies affected by the pandemic as possible, allowing them to return to profitability.
The approved changes are as follows:
– Elimination of the requirement for a more than 20% reduction in net turnover in 2020 compared to 2019: This requirement has been removed as numerous cases have shown a significant deterioration in the solvency levels of beneficiary companies, both individually and, where applicable, on a consolidated basis, due to COVID-19, without a drop in net turnover exceeding 20%.
– Deterioration in capital structure: The deterioration in the capital structure, understood as the ratio of net equity to net financial debt, can now be calculated by comparing 2019 with 2020, or alternatively, with audited year-end or interim data for 2021.
– Possibility of reversing the crisis situation: A viable company or group of companies that were considered in crisis as of December 31, 2019, can now be eligible provided they have reversed this financial situation by the time of applying for FONREC temporary support.
– Reduction of the minimum annual net turnover threshold: The minimum net turnover threshold for companies eligible for FONREC financing has been adjusted to between 10 and 400 million euros on a consolidated basis (previously set between 15 and 400 million euros) as of the end of 2019. Additionally, companies exceeding 400 million euros in consolidated turnover that can justify being unable to access the SEPI-managed Strategic Companies Solvency Support Fund due to not meeting the minimum support amount required can also apply for and benefit from FONREC.
– Minimum operation amount per beneficiary: The minimum amount per beneficiary for funded operations has been reduced from 3 million euros to 2.5 million euros for SMEs, making the FONREC financing range between 2.5 and 25 million euros (previously 3 and 25 million euros).
– Allocation of funds: The criterion that financing granted cannot be used for the amortization of ordinary interest has been expanded.
– Limit on temporary support in debt instruments: The criterion that the maximum amount of temporary public support per beneficiary in debt instruments cannot exceed either double the annual wage costs of the beneficiary in 2019 or the last available year, or 25% of the total 2019 business volume, has been adjusted. Thus, the maximum amount cannot exceed the greater of these two limits, according to the new modification.
José Luis Curbelo, president of COFIDES, emphasized that “the modifications approved by the Council of Ministers respond to the wide range of cases observed in recent months, leading us to implement solutions that address the diverse circumstances affecting the long-term viability of a significant part of the business fabric. The objective of these modifications is to benefit a larger number of companies whose business has been severely impacted by the pandemic but whose circumstances did not fully align with the previous eligibility criteria. These are companies that, with FONREC support, will be able to recover their levels of activity and employment. The Fund will continue to work on a greater number of applications in the coming months, contributing to the economic recovery of the country and the maintenance of employment, as well as the strengthening of the business fabric and the supply chain.”
The aim of the COVID-19 Affected Companies Recapitalization Fund, endowed with 1 billion euros of public funds, is to prevent the destruction of jobs and the productive fabric at both national and regional levels. Selected companies can access financing between 2.5 and 25 million euros (between 2.5 million and 15 million for SMEs; between 4 and 25 million for non-SMEs), which will be provided through temporary investments in the form of equity participations, participatory loans, and other financial instruments. The duration of the financing will be a maximum of eight years, although the spirit of the Fund seeks a rapid amortization of investments once the supported companies’ situations stabilize, with each case analyzed individually.
Medium-sized companies facing temporary difficulties due to COVID-19 but viable in the medium and long term can submit their applications through the platform COFIDES has enabled for electronic documentation submission. As specialists, Kaizen Consulting offers advisory services in the application and management process for these funds to interested companies. Contact us, and we will study your case personally.