European Commission approves Lithuanian fund to enable up to €1 billion of liquidity and capital support to medium-sized and large enterprises affected by the coronavirus
The European Commission has approved Lithuanian plans to set up a fund with a target size of up to €1 billion that will invest through debt and equity instruments in medium-sized and large enterprises active in Lithuania affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This Lithuanian fund aims to unlock liquidity and capital support of up to €1 billion to Lithuanian companies affected by the coronavirus outbreak by facilitating their access to finance in these difficult times. It is the first scheme we have approved that will enable capital support to companies under the State aid Temporary Framework. The scheme ensures that the State is sufficiently remunerated for the risk taxpayers assume, 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 Lithuanian support measure
Lithuania notified to the Commission under the Temporary Framework a fund with a target size of up to €1 billion to provide liquidity and capital support to medium-sized and large enterprises in Lithuania affected by the coronavirus outbreak. Under the scheme, the support will take the form of subsidised debt instruments and recapitalisation instruments.
The State will provide an initial investment of €100 million in the fund, and will guarantee bonds up to €400 million that will be issued to raise additional capital for the fund. The State’s total investment in the fund may therefore increase up to €500 million. The fund will also aim to attract private investments for up to additional €500 million. Private investments will be made on different terms with respect to the State: the risk-sharing arrangements will be determined through an open, transparent, non-discriminatory call in order to minimise any possible aid to private investors.
The Commission found that the Lithuanian measure is in line with the conditions set out in the Temporary Framework. In particular:
With respect to aid in the form of debt instruments, the scheme (i) covers working capital and investment needs with a limited maturity and size; (ii) is limited in time; and (iii) provides for adequate remuneration for the State in line with the conditions under the Temporary Framework.
With respect to recapitalisation measures, (i) support is available to companies, 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 restore their capital position before the coronavirus outbreak; (iii) the scheme provides an adequate remuneration for the State; (iv) the conditions of the measures incentivise beneficiaries and/or their owners to repay the support as early as possible (inter alia through progressive increases in remuneration, a dividend ban as well as a cap on the remuneration of and ban of bonus payments to management); (v) safeguardsare in place to make surethat 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.
The Commission also found that the open call to attract private investors will help make sure that the aid is limited to the minimum necessary and contributes to the objective of attracting additional private financing to companies affected by the coronavirus outbreak. Furthermore, the remuneration for the fund manager will be set in line with market conditions, ensuring that any potential aid to the fund manager is minimised.
Finally, only companies that were not considered to be in 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) TFEU and the conditions set out in the Temporary Framework.
On this basis, the Commission approved the measure under EU State aid rules.