France adds $23 billion scheme to aid measures for company finances

PARIS (Reuters) – France is set to expand its aid measures to help small businesses hit by the coronavirus pandemic with a 20 billion euro ($23.5 billion) scheme of quasi-equity loans partially backed by the state, the government said on Monday.

The programme, which would involve funding from institutional investors such as insurers, comes on top of a 300 billion-euro package of state-backed loans made available earlier this year as the pandemic spiralled and many firms had to halt operations or tap emergency cash.

The new scheme, which would be up and running in the first quarter of 2021, aims to give small, unlisted companies financing options that would not entail taking on more pure debt, which could risk tripping them up as a recession bites.

French firms were already saddled with record levels of debt before the crisis, and the government fears overburdened companies will pull back even more on their investment plans just as it tries to jumpstart the economy.

Economy Minister Bruno Le Maire said on Monday the latest programme, which is still being discussed with EU state aid regulators, would make between 10 billion and 20 billion euros of equity-style instruments available to firms.

Banks would first lend to small and mid-sized firms and then sell on 90% of the loans to institutional investors, people familiar with the proposals told Reuters last week, while the plan will benefit from a partial state guarantee.

Details including on the proposed interest rates would be finalised in the coming weeks, Le Maire added. The programme would run until the end of 2022.

Unlike the state-backed loans, which were meant to help businesses resolve pressing cash flow problems, the quasi-equity loans would be more geared towards helping promising firms which were held back by the crisis accelerate investment plans.