THE Spanish government is considering debt relief measures to help companies weather the coronavirus pandemic storm.
Last year, aid was focused on furlough schemes and a state-backed loan guarantee programme.
This has helped push state debt up to an estimated 120% of GDP. Now there is a growing realisation that the emphasis of government help will need to change as pandemic restrictions drag on and a vaccine roll-out is stalled.
With Spanish bankruptcy laws cumbersome and often leading to the demise rather than rescue of struggling businesses, the aim of inter-departmental negotiations is to save businesses that have a good chance of survival once the crisis is over, according to media reports.
One proposal would excuse a portion of the debt borrowed through Spain’s state-backed loan guarantee programme that was rolled out last year.
Another being considered is to use state guarantees to encourage banks to offer companies participatory loans, sources said.
Such subordinated debt is treated as similar to equity and improves the financial situation of a company by reducing its debt ratio. This means banks are more likely to either lend more cash or hold off forestalling on loans.