Financing viable distressed firms in Morocco: designing a public risk-sharing mechanism for bank restructuring finance

Abstract

When banks are least inclined to extend risk due to financial hardship, viable businesses may need more liquidity. In order to assist real bank new money during corporate restructuring, this essay presents a legislative design for a specific Moroccan public risk-sharing system. The study makes use of secondary Moroccan information, legal-institutional analysis, qualitative documentary analysis, and comparative benchmarking of governmental credit-guarantee programs. It concludes that although Morocco already has the key components—Book V protections for specific new financing, TAMWILCOM's guaranty infrastructure, a track record of restructuring cofinancing, and recent prudential reforms—these components do not constitute a specific framework for restructuring new money. Targeting companies whose distress is significant but whose underlying business model is still viable, the proposed Moroccan Restructuring Finance Guaranty Window would primarily rely on partial pari passu loss sharing; require newness, necessity, proportionality, additionality, and traceability; maintain significant lender exposure; and condition guaranty calls on monitoring and use-of-proceeds compliance. The contribution is an integrated approach that minimizes fiscal risk and moral hazard while connecting insolvency legislation, credit-guarantee design, prudential controls, and ex post impact evaluation.