On 1 May 2020, the Provisions for Additional Liquidity to the Economy to Mitigate the Consequences of the COVID-19 Epidemic Act (ZDLGPE) came into force. The Act defines the basis and conditions under which the Republic of Slovenia will act as a guarantor for the obligations of borrowers who have or will (between 12 March 2020 and 31 December 2020) enter into a credit agreement with banks in the Republic of Slovenia.
The guarantee of the Republic of Slovenia is provided to the borrower, who is a legal or natural person performing an activity (i.e. also for sole proprietors) and is established in Slovenia. The condition for granting the guarantee is that after 31 December 2019, the borrower is facing liquidity problems for business reasons related to the consequences of the COVID-19 epidemic in Slovenia and at the end of 2019 the borrower was not considered a firm in difficulty. As of 12 March 2020, the borrower also should not have any significant delays in settling its liabilities with the bank.
The borrower will be required to submit the latest financial statement, a description of the business situation due to the consequences of COVID-19, together with an indication of the amount of total proceeds from the borrower's sales in 2019, the amount of labour costs for 2019, and the definition of the amount, maturity and purpose of the credit, in its application to the bank for the loan or as a supplement to the loan agreement concluded after 12 March 2020 (in the event of the Republic of Slovenia entering as a guarantor). The guarantee under ZDLGPE is taken after the fulfilment of all conditions of this Act, i.e. ex lege. More detailed provisions regarding deadlines, documentation and reporting on fulfilment of obligations, as well as on liquidation and recovery of collateral, will be further regulated by the Decree of the Government of the Republic of Slovenia.
The state will assume a guarantee of 70% of the principal of an individual loan given to a large company or 80% of the principal of an individual loan given to a micro, small or medium-sized company. The maximum amount of the principal for which the guarantee is given for an individual borrower is up to 10% of sales revenue in 2019 and up to the amount of labour costs for 2019. In the event that the borrower is granted a deferred payment for newly concluded loan contracts under the first anti-corona stimulus package, the maximum amount of the borrower's liabilities is further increased by the amount of those obligations.
As a guarantor, the government guarantees the payment of the borrower's debt from the budget or by delivery of a bond issued by SID Bank (in the case of loans to large companies) or the Republic of Slovenia (in the case of loans to other companies). In the event of default, the state will settle 70% or 80% of the debt to the bank and will assume the claim on its own, and all the collateral given will be transferred to it.
In the case that the Republic of Slovenia accedes as a guarantor to the loan agreement, it is important to emphasize that the borrower will be restricted in its continued operation, since from the submission of the loan application to the termination of the bank's right to exercise the right to the guarantee (i.e. until the moment when all obligations to the bank are fully repaid, or by the time the Republic of Slovenia / SID Bank assumes all the rights under the credit agreement, including credit insurance), it will not be entitled to pay profits, rewards for business performance to members of management, purchase treasury shares and pay other financial liabilities to its parent or related companies or owners. The borrower will also be required to pay guarantee premiums in addition to other loan costs.
In accordance with Article 9 of ZDLGPE, a state guarantee will be given for a maximum amount of principal amounts up to 2 billion EUR, which will be considered by type or by spending. It is unclear when the commercial banks will realize that the maximum amount has been exceeded (but the guarantee is assumed by the law), since ZDLGPE stipulates that SID Bank keeps a record of all credit agreements and monitors the use of the guarantee amount.