Commission approves €10 billion Spanish fund to provide debt and capital support to companies affected by the coronavirus outbreak

The European Commission has approved Spanish plans to set up a fund (Solvency Support Fund) with a budget of €10 billion that will invest through debt and equity instruments in companies active in Spain 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: “The coronavirus crisis has hit the Spanish economy hard. The Spanish Solvency Support Fund aims to unlock capital support of €10 billion to Spanish companies by facilitating their access to finance in these difficult times. The scheme ensures that 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 the support comes with strings attached, including a ban on dividends, bonus payments as well as further measures to limit distortions of competition. 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.”

The Spanish support measure

Spain notified the Commission under the Temporary Framework of plans to establish a €10 billion fund through the State budget that will provide debt and capital support to strategic enterprises active in Spain affected by the coronavirus outbreak. Under the scheme, the support will take the form of debt and recapitalisation instruments.

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) safeguardsare in place to ensurethat 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; (vi) aid to a company above the threshold of €250 million has to 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.

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 isnecessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, 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.

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