€20 billion in financing distributed to SMEs and SMIs in the form of equity loans and subordinated bonds

Following negotiations with Brussels, the French government presented on March 4, 2021 the new scheme designed to strengthen the equity capital of French small and medium-sized enterprises that have been undermined in these times of health crisis, amounting to 20 billion euros, distributed through two channels:

• €14 billion in the form of "participatory loans with state support" ("PPSE")
• €6 billion in the form of "subordinated bonds" ("recovery bonds").

Whatever the vehicle (loan or bond), the State will provide a 30% guarantee on the total amount of funds provided, i.e. 6 billion euros.

These investments will be reserved for SMEs and ETIs with pre-crisis revenues (in 2019) of more than €2 million and that are viable (i.e. with a Banque de France - Fiben rating of at least 5+).

In terms of timing, this financing must be deployed by June 30, 2022 and can only finance investments and not pre-existing debt.

Equity loans, a rate of 5 to 6% over 8 years with capital repayment from the 5th year

The participatory loans, distributed by the banks, will have a term of 8 years. They may be cumulated with EMPs, but in this case, however, will be capped. The interest rate will be between 5 and 6% depending on the size of the SME and the pricing will be specific to each bank (which will thus be in competition). The loans will be amortizable after 4 years: during the first four years, only the interests will be reimbursed, the reimbursement of the capital will be added from the fifth year.

This scheme will be more selective than the EMP, as not all SMEs that have benefited from an EMP since the beginning of the crisis will be eligible. However, having been granted an EMP will not close the possibility of benefiting from a PPSE; it will reduce the amount: Indeed, if the combination of the PPSE and the EMP represents more than 25% of the 2019 turnover, SMEs will be able to borrow up to 10% of their 2019 turnover and ETIs up to 5% of it. In comparison, if they have not benefited from the EMP, SMEs will be able to borrow up to 12.5% of their 2019 turnover and 8.4% for TPEs.

The stated goal is to begin distributing these loans in April 2021.

The dunning bonds, subordinated bonds with an interest rate of 5 to 6% and an "in fine" repayment for the entire

The "relance bonds", which are subordinated bonds, will be distributed by private equity players, most likely starting in May 2021.

They benefit from the same state guarantee as the PPSE, with a rate varying from 5 to 6% depending on the size of the company. A notable difference with the equity loan is that repayment will be entirely "in fine": only the interest will be repaid during the 8-year period, the amount of the bond being repaid in full at maturity.

"Recovery bonds" and "recovery label", two very different schemes that should not be confused!

Despite the terms chosen, one should not confuse "recovery bonds", which are OBSAs offered as a mirror image of equity loans, and the "recovery label", launched by the government as part of the recovery plan, in October 2019.

This label, which recognizes investment funds that are committed to rapidly mobilizing new resources to support the equity and quasi-equity of French SMEs and STIs, should enable savers and professional investors to identify funds that respond to the needs of French companies, and thus "direct" savings towards the recovery.

To qualify, funds must meet a set of so-called "ESG" (environmental, social and governance) criteria, including a ban on financing coal-fired activities. More specifically, certified funds must commit to investing at least 30% of their assets in French SMEs or SMIs, including at least 10% in SMEs.

Management companies can apply for the label until December 31, 2022 and the label is acquired for 4 years after it is granted.

As of February 2021, more than 130 funds have been accredited.

The recovery label and recovery bonds are therefore two very different schemes: funds that have obtained the recovery label will not necessarily distribute recovery bonds and recovery bonds will not necessarily be distributed by funds with the recovery label.