'Cura Italia' Decree Enacted—Measures Relevant For Financing Transactions

In Short

The Situation: The coronavirus (COVID-19) pandemic is having an impact on businesses across various sectors in Italy.

The Action: The Italian government recently enacted the Law Decree No. 18 of March 17, 2020 ("Decree") implementing a number of financing transaction-related measures designed to mitigate the adverse economic impact of COVID-19.

Looking Ahead: Market participants must consider the provisions of the Decree to assess the impact on either existing or new financing transactions.

The "Cura Italia" Decree introduces a number of urgent measures relating to certain financing transactions to mitigate the adverse economic impact of COVID-19 on individuals, companies, and financial institutions. The measures include the following:

Suspension of Payments Due Under Residential Loans

Payments due under residential loans of a primary dwelling property (mutui per l'acquisto della prima casa) may be suspended. In particular, the Decree expanded the scope of application of the "Gasparrini Fund" in favor of self-employed individuals and professionals who have suffered a significant reduction of their business activity due to orders taken by authorities in connection with COVID-19.

The suspension is regulated by the provisions governing the Gasparrini Fund and may be requested:

Only for loans in respect of which no enforcement procedures have been commenced; For no more than two times; and For a period not exceeding 18 months. Suspension of Payments Due Under SMEs Loans and Leasing

Micro, small, and medium-sized enterprises ("SMEs") may ask for a suspension of payments due under any kind of financing (i.e., secured and unsecured loans, financial lease, etc.) granted by banks, financial intermediaries, and other entities authorized to carry out lending activity in Italy.

The suspension shall apply only to enterprises:

Qualifying as "micro, small, and medium-sized enterprises"; Having their registered office in Italy; Not having nonperforming exposures; and Certifying that they have suffered a temporary lack of liquidity as a direct consequence of COVID-19. In addition, the suspension will operate as follows:

For existing credit facilities as of February 29, 2020, the amounts set forth in the relevant credit facility (including the portion not yet drawn down by the borrower) cannot be revoked until September 30, 2020; For loans providing for a bullet repayment scheduled at any time before September 30, 2020, such repayment obligations...