Guarantees for large enterprises
The Austrian Federal Government has put together an aid package of EUR 38 billion to cushion the economic effects of the COVID 19 crisis. Large enterprises can primarily benefit from the subsidies provided for under the EUR 15 billion Corona Assistance Fund. In the following you will find a short overview of the requirements as well as the legal basis for guarantees from the Corona Assistance Fund for large enterprises in FAQ form.
The following are eligible for guarantees
Large enterprises (“LE”) which
- are particularly affected by measures such as bans on entry, travel or assembly restrictions and have liquidity problems, or
- are confronted with major revenue losses and whose commercial basis is threatened as a result of the Corona-crisis.
LE are companies (i) with 250 or more employees or (ii) with less than 250 employees and a turnover of more than EUR 50 million and a balance sheet total of more than EUR 43 million.
How can guarantees from the Corona Assistance Fund be applied for?
Credit guarantees for bridge financing for LE are handled by the COVID-19 Finanzierungsagentur des Bundes GmbH ("COFAG") and Österreichische Kontrollbank (OeKB) as authorised representative of COFAG. The single point of contact for the LE is its principal bank, which forwards the application to OeKB. The respective application form (“COFAG Application”) is available at https://www.oekb.at/oekb-gruppe/news-und-wissen/news/2020/corona-hilfsfonds.html or https://cofag.at/.
Must EU state aid rules be complied with?
Yes. Measures to cushion the effects of the COVID 19 crisis are not exempted en bloc from EU state aid law and must therefore be approved in advance by the EU Commission. However, EU member states want to provide liquidity and other assistance to affected companies as quickly and "unbureaucratically" as possible. Therefore, the European Commission has issued a 'Temporary Framework for State Aid Measures to Support the Economy in the current COVID-19 outbreak' (“TFSA”). The TFSA provides flexibility with regard to aid measures. However, it is very clear that the "cornerstones" of EU state aid law shall remain untouched even in times of crisis: The TFSA
- adopts criteria and definitions from Regulation (EU) No 651/2014 (General Block Exemption Regulation - “GBER”), such as the concept of “undertakings in difficulty”, to ensure that only undertakings that were economically sound before the crisis are eligible for aid. Aid for rescue and restructuring is therefore not allowed under this regime. The TFSA
- provides for stricter requirements for LE under certain circumstances
- sets maximum limits and maximum periods for the measures
- ensures that aid is only “channelled” through financial intermediaries (i.e. banks), but reaches the undertakings concerned.
On this basis, the European Commission approved the measures under the Corona Assistance Fund (see decision SA.56840 and SA.56981). The "classic COVID-19 combination" of Art 107 para 3 lit b TFEU and TFSA served as the legal basis. The above-mentioned criteria are reflected in these decisions as well as in relevant national provisions, e.g. in the Ordinance of the Federal Ministry of Finance on Guidelines on Financial Measures, Federal Law Gazette II No. 143/2020 ("FMF Guidelines").
What conditions must the LE fulfil?
The LE must comply with the conditions set out in the FMF Guidelines:
The LE has its headquarters or a permanent establishment in Austria and carries out its significant operational activity in Austria.
It is likely that the LE will be able to repay the guaranteed financing within a reasonable period of time in the normal course of business. This must be demonstrated in the context of the application (e.g. by liquidity plans, short and medium-term plans, repayment schedules or a written statement of the company).
The guaranteed financing will not be used to reduce existing financial liabilities (debt rescheduling) or to secure financial liabilities other than the guaranteed financing.
The guaranteed financing is used to cover liquidity needs caused by economic effects resulting from the spread of COVID-19.
The LE must indicate whether it has been granted or has applied for other financial measures and if so to what extent.
The LE has taken appropriate measures to reduce, avoid or defer the payment obligations to be covered by the guaranteed financing.
The liquidity needs are not additionally covered by other government (e.g. deferral of taxes, short-time working) or private (e.g. insurance) measures.
The LE was not already in financial difficulty on 31 December 2019.
A guarantee may not be granted to an LE that was in financial difficulty within the meaning of the GBER on 31 December 2019, i.e. an undertaking in respect of which at least one of the following circumstances occurs:
- more than half of the subscribed share capital (in the case of corporations) or (ii) of the equity capital shown in the books (in the case of partnerships) has disappeared as a result of accumulated losses.
- The requirements for the opening of insolvency proceedings (inability to pay, over-indebtedness) are met or the LE is subject to insolvency proceedings.
- The LE has received rescue aid and the loan has not yet been repaid or the guarantee has not yet expired or the LE has received restructuring aid and is still subject to a restructuring plan.
- For the past two years, (i) the LE’s book debt to equity ratio has been greater than 7,5 and (ii) the LE’s EBITDA interest coverage ratio has been below 1,0.
The LE is not a regulated entity in the financial or insurance sector.
Legal entities in the financial sector (e.g. credit institutions, insurance companies, investment firms and investment service providers) which are registered or licensed in Austria, a Member State (Sec 2 para 5 Austrian Banking Act, Federal Law Gazette No 532/1993 – “ABA”) or a third country (Sec 2 para 8 ABA) and which are subject to prudential supervisory provisions with regard to their activities are not eligible for aid under the Corona Assistance Fund.
By signing the COFAG Application, the LE confirms compliance with the requirements described above and accepts the General Terms and Conditions for Bridge Finance Guarantees for Large Enterprises pursuant to Sec 2 para 2 no 7 of the Federal Act Incorporating a Federal Divestment (Public Limited) Company (ABBAG-Gesetz) ("GTC Bridge Finance Guarantees").
The extent to which financial measures may be applied for depends on the payment obligations of the LE not covered without these financial measures for the relevant period (5.1.), taking into account the maximum limit (5.2.).
The relevant period must correspond to the expected duration of the economic impact on the LE resulting from the spread of COVID-19, which caused the liquidity problems. The exact period must be specified in the COFAG application but will typically be the period from 2 March 2020 to 30 September 2020. If required due to the special circumstances of the LE (e.g. seasonality of the business model, particularly intensive adverse economic effects in an industry) a longer period may be indicated. A subsequent and repeated extension of the period and – consequently - an increase in the financial measure are permissible up to certain limits (see 5.2.).
(i) For loans with a maturity beyond 31 December 2020, the overall amount of loans per LE shall not exceed:
- double the annual wage bill of the LE (including social charges as well as the cost for personnel working on the LE’s site but formally in the payroll of subcontractors) for 2019, or for the last year available; or
- 25% of the LE's total turnover in 2019; or
- with appropriate justification and based on self-certification by the LE of its liquidity needs, the amount of the loan may be increased to cover the liquidity needs of LE from the moment of granting for the coming 12 months
(ii) For loans with a maturity until 31 December 2020, the amount of the loan principal may be higher than under point 5.2 (i) above, with appropriate justification and provided that the proportionality of the aid remains assured.
The guarantee coverage is limited to 90% of the loan amount. Guarantees shall cover the full maturity of the underlying instrument. If the size of the loan decreases (e.g. due to repayment) then the value of the guarantee will decrease proportionally. Losses under the guarantee are sustained proportionally and under the same conditions, by the bank and COFAG.
The guarantees for new investment or working capital loans have maturities from three months up to a maximum of six years.
Evidence/documents to be provided when submitting the application
At the time of application
Current extract from the companies’ register, if available
Presentation / organization chart of the legal corporate structure:
- Ownership structure
- Affiliated companies (if any)
- Group structure
Detailed description of the object of the company
Economic development to date
- Annual financial statements and (in case of group companies) consolidated financial statements and audit reports for 2018 and 2019 (draft form possible)
- Any letters from the auditor on exercising the obligation to speak
- Monthly profit development (profit and loss accounts) for 2019 (e.g. monthly balance list, short-term profit and loss statement, controlling reports etc.)
- Bank statements, including collateral and repayment schedules
assessment of the expected economic impact on
- Customer / supplier relations
- Service provision / production
Monthly earnings and finance planning for the indicated relevant period. Any measures taken to reduce liquidity needs (in accordance with pint 3 COFAG Application) must be indicated separately and noted accordingly.
Description, quantification and suitable evidence of the applicant's measures to reduce liquidity needs and other public support (pursuant to point 3 COFAG Application).
Forecast (earnings and financial planning) which shows prepayment possibilities of the guaranteed financing at maturity
SWOT analysis of bank
Ongoing information obligations
Annual accounts must be submitted no later than nine months after the balance sheet date
Immediate written information on any circumstances not present at the time of the application which affect the risk of COFAG in connection with the bridge finance guarantee granted by COFAG to the applicant in a more than insignificant way (see point 7.7 COFAG Application)
Please note: This newsletter merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The newsletter cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the newsletter.
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