The Advisory Services of PKF Attest and Kaizen Consulting for Accessing the Cofides Fund Featured in Levante and Valencia Plaza

The advisory and support services provided by PKF Attest and Kaizen Consulting to companies seeking access to Cofides funds are making headlines today in Levante and Valencia Plaza. Conditions for accessing these funds have been relaxed following the Council of Ministers’ approval of several modifications on December 7, which affect the regulations of the COVID-19 Affected Companies Recapitalization Fund (FONREC). These changes respond to numerous cases of companies facing difficulties directly or indirectly attributable to the pandemic, which did not qualify under the original criteria established for the Fund.
The most significant modifications are:
– The minimum revenue threshold for companies eligible for the fund has been lowered to 10 million EUR from the previous 15 million EUR. The revenue range is now between 10 and 400 million EUR.
– Companies with revenue exceeding 400 million EUR, which did not meet the minimum aid amount previously, can now access the Cofides Fund.
– The new aid range from the Fund is between 2.5 and 25 million EUR.
– The requirement for a 20% drop in 2020 revenue compared to 2019 has been eliminated.
– The deterioration of the capital structure (Net Equity/Net Financial Debt) can now be justified by comparing the end of 2021 against 2019.
– Companies considered in crisis at the end of 2019 are now eligible, provided they have reversed this situation by the time of applying for the Fund.
– The maximum aid amount from the Fund will be the more favorable of: (i) double the beneficiary’s annual salary costs in 2019 or the last available year, (ii) 25% of the total 2019 business volume. For the latter calculation, COVID ICO loans requested by companies are also counted as ordinary debt with state aid.
These modifications apply to the COVID-19 Affected Companies Recapitalization Fund created in March 2021, managed by the public-private commercial company Cofides. This tool is aimed at medium-sized companies in any sector that were viable before COVID-19 and, maintaining medium to long-term viability, were significantly affected by the pandemic.
This mechanism has a total allocation of 1 billion euros and is regulated by the European and national Temporary Framework concerning state aid measures to support the economy in the context of COVID-19. Cofides will use capital or hybrid instruments (such as participatory loans), which must be repaid within a maximum of 8 years, and ordinary loans, which must be repaid within a maximum of 6 years.
Capital instruments cannot improve the capital structure at the end of 2019, understood as the Net Equity/Net Financial Debt ratio. A delayed effect, expected throughout 2022, is the end of the maximum grace period for the 140 billion EUR of ICO-backed bank loans. The debt service on these loans will likely exceed the cash generation capacity of many companies, especially those that requested them in 2020 to cover severe losses.
The six-month extension granted by the European Commission last November (from December 31, 2021, to June 30, 2022) provides some relief, although perhaps insufficient, for companies to utilize part of these necessary funds for their recovery and continuity.
The relaxation of requirements to access the fund will benefit not only new applications but also previously submitted ones that could not access financing under the old criteria.
The ultimate goal of these announced changes, extension of the deadline, and relaxation of conditions is to support and provide financing to the maximum number of companies affected by the pandemic.
Kaizen Consulting has a collaboration agreement with PKF Attest for specialized advisory services in the Valencian Community to help companies access all types of financing options. Our team of experts can help companies determine if they meet the eligibility criteria and guide them through accessing the Cofides Fund, enabling them to return to profitability.
At Kaizen Consulting, we specialize in maximizing financing options with both traditional and alternative banking and can support companies throughout the process of accessing the 1 billion euros Cofides fund. Contact us for any inquiries, and we will study your case in detail.