ayuda de estado

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Last week we reported that two guarantee systems notified by Spain as state aid had been authorized by the European Commission. The decision was published (available here) in English only, with Spain having waived its right to receive the decision in its own language. The Commission took only 24 hours to approve the measure.

The decision describes the measure that Spain notified, and the Commission’s legal assessment taking into consideration article 107.3.b) of the Treaty on the Functioning of the European Union (“TFEU”), which enables the authorization of aid needed to remedy a serious disturbance in the economy of a Member State.

The measure is the first tranche of a line of guarantees to cover the financing by financial institutions to companies and the self-employed. De minimis aid rules will apply to amounts up to €1.5 million, which are therefore excluded from the Commission’s decision and subject to Regulation (EU) no. 1407/2013. For amounts exceeding €1.5 million, the measure will apply as follows:

  • Guarantees may be granted through the Spanish Official Credit Institute (“ICO”) until September 30, 2020, or potentially until December 31, 2020, if an extension is approved by the Council of Ministers.
  • Loans or refinancing deals agreed on or after March 17, 2020, can be guaranteed. Any credit institution, financial credit establishment, electronic money entity or payment entity can act as intermediary.
  • Guarantees may relate to both investment and working capital loans.
  • The potential beneficiaries are companies registered in Spain, except for undertakings in difficulties (according to State aid rules) as of December 31, 2019. All sectors except for financial institutions can benefit from the measure.
  • The guarantee will cover up to 80% of the loan/refinancing in the case of SMEs and the self-employed, and 70% of the loan or 60% of the refinancing for large undertakings.
  • The guarantees may last for up to five years, and as the loan amount reduces, so will the associated guarantee.
  • For loans maturing after December 31, 2020, the loan amount must meet the following criteria:
    • It must not exceed double the annual wage bill of the beneficiaryfor 2019, or the last year available. For undertakings created on or after January 1, 2019, the loan must not exceed the estimated annual wage bill for the first two years in operation.
    • It must not surpass 25% of the beneficiary’s total turnover in 2019.
    • With the beneficiary’s own certification of its liquidity needs, the loan may increase to cover these needs for 18 months after the loan is granted for SMEs, and 12 months for large companies.
  • For loans maturing before December 31, 2020, the loan amount can exceed the amount indicated in the last point, where justified and proportional.
  • The costs associated with loans and refinancing will be the same as those offered by financial institutions before the health crisis began. Oversight mechanisms will be put in place to ensure that financial institutions pass on the advantages of the public guarantees to their beneficiaries.
  • For loans of more than €50 million, the ICO will perform its own risk analysis in addition to the financial intermediary.
  • The costs of the guarantee will be staggered (rising annually on the amounts outstanding).
  • Premiums will apply that specifically consider the limited coverage of the guarantees offered (compared with the maximums allowed by the  Temporary Framework for State aid measures to support the economy in the current COVID19 outbreak (the “Temporary Framework”):

Beneficiary
Instrument 1st year 2nd-3rd year 4th-5th year Coverage guarantee
SMEs/self-employed New loans/refinancing 20bps 30bps 80bps 80%
Other undertakings New loans 30bps 60bps 120bps 70%
Other undertakings Refinancing 25bps 50bps 100bps 60%
  • The guarantee may be combined with other compatible aid, provided the maximum intensities established in corresponding directives or the Block Exemptions Regulations have not been exceeded.

The notified measure meets all criteria to be considered as State aid: (i) it is financed by State resources; (ii) it offers an advantage by covering the costs that beneficiaries would face in normal market conditions; (iii) it only benefits the self-employed, SMEs and large enterprises registered in Spain that take out loans or refinancing operations that can be guaranteed by the State, excluding financial institutions; and (iv) because it strengthens the competitive position of beneficiaries that operate in sectors where intra-Union trade exists, it could affect competition and market conditions between Member States.

Taking into account all the characteristics listed above, the European Commission finds the notified measure to be necessary, appropriate and proportionate to remedy a serious disturbance in a Member State’s economy. In particular, the Commission has performed a line-by-line check of the Temporary Framework, which has shown that the measure notified by Spain applies coverage thresholds to the guarantees and loan maturities below those authorized under that guidance.

As of March 30, the European Commission had adopted 18 decisions authorizing state aid to alleviate the effects of COVID-19 in Germany, Denmark, Estonia, France, Italy, Lithuania, Luxembourg, Portugal and the United Kingdom. The vast majority are based on article 107.3b) of the TFEU, with just two based on article 107.2.b), which allows aid to make good the damage caused by natural disasters.

Author: Irene Moreno-Tapia

This post is also available in: Español

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Especialista en acuerdos de distribución y abusos de posición dominante, asesora regularmente a importantes multinacionales y fondos de inversión en materia de control de concentraciones, tanto a nivel español como comunitario, asumiendo su representación ante las instancias administrativas. Ha representado y asesorado con éxito a numerosos clientes ante las autoridades españolas en materia de defensa de la competencia, en los dos ámbitos administrativo y contencioso (acuerdos, abusos, concentraciones, ayudas públicas).

irene.moreno@cuatrecasas.com