EU competition enforcers on Thursday cleared a 20billioneuro 24 billion French scheme to help virushit companies via quasiequity loans and subordinated debt.

The European Commission said the scheme consists of a state guarantee for private investment vehicles, funded by private investors, that will acquire participating loans distributed by commercial banks as well as subordinated bonds, aimed at improving their capital position.

The French state guarantee will cover up to 30 of loans and subordinated bonds to be acquired by the private investment vehicles and these must be issued before June 30, 2022, with a maturity of 8 years.

French firms went into the COVID19 crisis last year already with a record level of debt, and they drew heavily on stateguaranteed loans from their banks as cashflow collapsed during Frances worst postwar recession.

With maturities of eight years and junior to other creditors claims, the new loans will have the advantage of not counting as debt on balance sheets, freeing up resources for operations and investment, critical for an economic recovery.

They will have longer maturities than the first round of statebacked loans and also carry higher interest rates. They will also have a fouryear initial grace period on principal repayments and companies are required to use the money for financing investment, not previous debt, the Commission said.

While banks will make the loans to companies, the money will come from institutional investors with…