A Spanish fund called the Solvency Support Fund with a budget of €10 billion to invest through debt and equity instruments in companies active in Spain affected by the coronavirus outbreak, has been approved by the European Commission. It was approved under the State Aid Temporary Framework. Margrethe Vestager, executive vice-president of the European Commission in charge of competition policy, says the coronavirus crisis has hit the Spanish economy hard. She says the fund aims to unlock capital support to Spanish companies by facilitating their access to finance in these difficult times. “The scheme ensures the state is sufficiently remunerated for the risk assumed by taxpayers, that there are incentives for the state to exit as soon as possible and that support comes with strings attached. This includes a ban on dividends, bonus payments and further measures to limit distortions of competition,” says Vestager. According to the executive vice-president, Spain notified the commission under the Temporary Framework of plans to establish a €10 billion fund through the state budget to provide debt and capital support to strategic enterprises active in Spain affected by the coronavirus outbreak. She says under the scheme, the support will take the form of debt and recapitalisation instruments. The commission has found the Spanish measure is in line with conditions set out in the Temporary Framework. With respect to recapitalisation measures this includes:
· Support is available to companies only if no other appropriate solution is available and it is in the common interest to intervene
· Support is limited to the amount necessary to ensure viability of beneficiaries and to restore their capital position to before the coronavirus outbreak
· 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
· Safeguards are in place to ensure 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
· Aid to a company above the threshold of €250 million must be notified separately for individual assessment.
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 stricter conditions established for recapitalisation measures in line with the Temporary Framework. Only companies that were not considered to be in financial difficulty already on 31 December 2019 are eligible for aid under this scheme.
Vestager says the commission found that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state. She says this is in line with Article 107(3)(b) of the Treaty on the Functioning of the European Union (EU) and the conditions set out in the Temporary Framework.
“On this basis, it approved the measure under EU State aid rules. We continue to work in close cooperation with member states to find workable solutions to mitigate the economic impact of the coronavirus outbreak in line with EU rules,” says the executive vice-president.