Written October 14, 2022 at 06.15Updated on October 14, 2022 at 07.20
Don’t tell the banks, they hate it. Especially when the state puts an end to “what it will cost” and the economic situation darkens. Some companies in difficulty have had their shale guarantee loans from the state (PGE) at least partially written off.
The only condition: a promise of partial repayment according to their future recovery, contractualized in the form of a “return to better fortune clause”. An option made possible by a decree of 8 July 2021.
One of its beneficiaries: Cityscoot. The electric scooter rental company has achieved a PGE of around twenty million euros and has just completed its financial restructuring. The company has not commented.
“The banks do not want these concessions, even though they can potentially recover part of the debt amount,” says an expert. With this type of decision, they certainly risk losing the rest of their receivables outside PGE and are therefore not protected by the state guarantee.
And if not, if they do not make concessions on other debts, they can be accused of not having respected the equal treatment of creditors. The state could then refuse to pay its guarantee, i.e. 90% on average of the PGE amount…
The state at all levels
In the case of Cityscoot, the banks did not have much choice: the offer of Paris City Hall, which the company applied for, is not a valuable asset, despite the positive market outlook. And letting the company go through the procedure would have embarrassed some of its sensitive shareholders: RATP and Banque des Territoires, a subsidiary of the Caisse des Dépôts.
“In reality, the state was at all levels – the loan and the capital – so it helped determine the banks. This opportunity is completely exceptional in the restructuring of PGE”, says a good acquaintance of the file. And the two public shareholders have reinvested 15 million euros in the company. “It may be interesting for a number of start-ups that are not profitable and have applied for PGEs,” says an expert.
On the side of the administration, if we consider this new case as quite rare at this stage – in the order of ten beneficiaries – “it is a much easier and more interesting option to introduce than conversions in capital of PGE via trusts”.
An alternative to capital conversions
“PGE conversions, as in Pierre & Vacances, only work in large files, adds a lawyer. It is complex to structure and the sale of the securities of the company held in trust can be difficult and time consuming. For the banks and the state, the prospect of getting their share back is much more dim. This option is actually rather preferred for listed companies, they say at Bercy.
In case of difficulties, all exit routes are good to take. Companies have started to repay their PGE in the vast majority of cases. But the state expects 4 billion euros in losses on PGEs for the years 2022 and 2023 out of the 140 billion euros in guaranteed loans granted.
According to figures from Credit Mediation, which deals with PGEs of up to 50,000 euros, or 441 files to date, 43% (118 companies) have seen their debt maturity postponed for a maximum of 4 years. Around 10% of the mediation requests fail, however, because the banks do not want to postpone the repayment of the other granted loans, which can be much larger. Or it is the companies, for risk of being stigmatized, that withdraw their request.