State aid: Commission approves €1 billion Spanish recapitalisation scheme to provide debt and capital support to companies affected by the coronavirus outbreak

(Credit: Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has approved, under EU State aid rules, Spanish plans to set up a €1 billion recapitalisation fund that will invest through debt and equity instruments in certain companies affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €1 billion recapitalisation scheme will enable Spain to support companies affected by the coronavirus outbreak by facilitating their access to finance in these difficult times. We continue working in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The Spanish support measure

Spain notified to the Commission under the Temporary Framework a €1 billion recapitalisation scheme to provide debt and capital support to companies affected by the coronavirus outbreak.

The scheme will be implemented through a recapitalisation fund, which goes under the name “Recapitalisation Fund for companies affected by COVID 19 outbreak”, with a budget of €1 billion. Under the scheme, the aid will take the form of debt and recapitalisation instruments, in particular equity and hybrid capital instruments.

The measure is open to companies established in Spain and active in all sectors except the financial one, with total net yearly revenues of minimum €15 million and up to €400 million on a consolidated basis, and that are now facing capital needs due to the coronavirus outbreak. Companies that have already received support through the “Solvency Fund for Strategic Enterprises” approved by the Commission in July 2020 (SA.57659) are not eligible for aid under this new scheme.

The Commission found that the Spanish measure is in line with the conditions set out in the Temporary Framework. In particular:

  • With respect to recapitalisation measures, (i) support is available to companies only if no other appropriate solution is available and it is in the common interest to intervene; (ii) support is limited to the amount necessary to ensure the viability of beneficiaries and to restore their capital position to before the coronavirus outbreak; (iii) the scheme provides an adequate remuneration for the State and it incentivises beneficiaries and/or their owners to repay the support as early as possible (including a dividend ban, and a ban on bonus payments to management); (iv) safeguards are in place to ensure that beneficiaries do not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the Single Market, such as an acquisition ban to avoid aggressive commercial expansion.
  • With respect to aid in the form of subordinated debt instruments, where the fund’s interventions exceed the relevant limits on turnover and wage bill of the beneficiaries, the aid will have to fully comply with the additional conditions established for recapitalisation measures, in line with the Temporary Framework.

Finally, only companies that were not considered to be in financial difficulty already on 31 December 2019 are eligible for aid under this scheme.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of Spain, in line with Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU) and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measure under EU State aid rules.

Background

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021, provides for the following types of aid, which can be granted by Member States:

(i) Direct grants, equity injections, selective tax advantages and advance payments of up to €225,000 to a company active in the primary agricultural sector, €270,000 to a company active in the fishery and aquaculture sector and €1.8 million to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €1.8 million per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €225,000 and €270,000 per company respectively, apply.

(ii) State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.

(iii) Subsidised public loans to companies (senior and subordinated debt) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.

(vi) Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.

(vii) Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(viii) Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.

(x) Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

(xi) Targeted recapitalisation aid to non-financial companies, if no other appropriate solution is available. Safeguards are in place to avoid undue distortions of competition in the Single Market: conditions on the necessity, appropriateness and size of intervention; conditions on the State’s entry in the capital of companies and remuneration; conditions regarding the exit of the State from the capital of the companies concerned; conditions regarding governance including dividend ban and remuneration caps for senior management; prohibition of cross-subsidisation and acquisition ban and additional measures to limit competition distortions; transparency and reporting requirements.

(xii) Support for uncovered fixed costs for companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 in the context of the coronavirus outbreak. The support will contribute to a part of the beneficiaries’ fixed costs that are not covered by their revenues, up to a maximum amount of €10 million per undertaking.

The Commission will also enable Member States to convert until 31 December 2022 repayable instruments (e.g. guarantees, loans, repayable advances) granted under the Temporary Framework into other forms of aid, such as direct grants, provided the conditions of the Temporary Framework are met.

The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.62067 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Here’s how to achieve growth in the Middle East and North Africa

UN Security Council condemns Taliban offensive as a blow against ‘sustainable peace’

Facebook and Google to treat Europe as the 51st State of the USA

European Solidarity Corps 2021-2027: First call for proposals to support youth volunteering activities

How music can help children with autism connect

To Bing or Not to Bing? That is the question

Gender equality: an issue much talked about but less acted upon

Terrorism and migrants: the two awful nightmares for Europe and Germany in 2016

Portugal can use its economic recovery to build up resilience

Pharmaceuticals spend millions to push TTIP while consumer groups spend peanuts

The EU Parliament slams Commission on economic governance

An economist explains the pros and cons of globalization

Protecting the front line: the healthcare of health professionals

State aid: Commission approves French scheme deferring payment by airlines of certain taxes to mitigate economic impact of coronavirus outbreak

Low productivity jobs continue to drive employment growth

“Fortress Europe”, “Pegida” and its laughing stocks

New challenge: Not going through “burnout” in times of quarantine

Mental and comportamental health in the pandemic context

An Easter Special: Social protection of migrants in Europe as seen through the eyes of European youth

Pharmaceuticals conceal drug side effects with the EU’s Court blessing

European Citizens’ Initiative: Commission registers ‘Mandatory food labelling Non-Vegetarian / Vegetarian / Vegan’ initiative’

Greenery: the miracle cure for urban living

Italy should boost investment in training for the future of work

Sustainable Finance: Commission welcomes the adoption by the European Parliament of the Taxonomy Regulation

Macro-Financial Assistance: Europe’s way to control Ukraine?

Companies can help build a more inclusive world. Here’s how

Joris in Indonesia

5 steps businesses can take to protect air quality after COVID-19

5 charts that show renewable energy’s latest milestone

Devastating storms like Hurricane Florence ‘unusual this far north’: UN weather agency

Inflammation is the fuel that feeds the cancer flame. So how do we fight back?

Digital democracy: a Swiss view on digital trust

Four in five adolescents failing to exercise for even 60 minutes a day, UN health agency warns

Gaza: deadly violence continues to escalate, top UN officials work to restore calm

This is Germany’s $45 billion, 18-year plan to move away from coal

‘Time is of the essence’ for refugees on Greek islands – UN agency

Huawei answers allegations about its selling prices

Break taboo around menstruation, act to end ‘disempowering’ discrimination, say UN experts

Can the whole world live in peace?

From Russia with love: Brussels and Moscow close to an agreement on Ukraine’s gas supplies

Innovations for Content Professionals at the DCX exhibition 2018 in Berlin, in association with The European Sting

EU prolongs economic sanctions on Russia by six months

Business is a crucial partner in solving the mental health challenge

UN chief welcomes event reuniting families on the Korean Peninsula

Rule of Law: Commission launches infringement procedure to protect the independence of the Polish Supreme Court

Auditors say EU spending delivers limited value for money but the timing of their report poses questions

Ebola Outbreak in Democratic Republic Congo is ‘largely contained’: WHO

Mergers: Commission refers acquisition of newly created joint venture by Telefónica and Liberty Global to the UK competition authority

Brexit: visa-free access to the EU for UK nationals and to the UK for Europeans

Statement following the European Medicines Agency review of the COVID-19 vaccine AstraZeneca

“Decisions taken in the coming weeks will shape Europe’s experience of the internet”, Joe Mcnamee from EDRi says live from European Business Summit 2015

We must rethink and repurpose cybersecurity for the COVID-19 era

Free and secure access needed in DR Congo conflict zone to tackle Ebola – WHO

Here’s what keeps CEOs awake at night (and why it might be bad news for your next job)

President Ursula von der Leyen welcomes the first official submission of a recovery and resilience plan by Portugal

THE COMMITTEES: ‘All roads lead to the Fifth’

EU summit: step up work for recovery, and update migration and asylum system

The Bavarians threaten Berlin and Brussels with immigration crisis

EU lawmakers vote to reintroduce visas for Americans over “reciprocity principle”

EU helps tackle air pollution in Kosovo with €76.4 million

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s