The first Belgian aid schemes notified since the start of the COVID-19 crisis have been approved by the European Commission. On 9 April 2020 the Commission authorised a state guarantee scheme to support firms operating in the Flemish Region. The Flemish Region has blocked a budget of EUR 3 billion for this guarantee scheme covering working capital and investment credits. On 11 April 2020, the Commission approved the state guarantee scheme with a total budget of EUR 50 billion.
The measures adopted aim to address the difficulties many companies are facing with regard to existing loans but also to obtain additional credits to cover their liquidity needs. The schemes were approved under the Temporary Framework for state aid measures adopted by the Commission on 19 March 2020 (as amended on 3 April 2020).
On 30 April 2020, it was the turn of the Walloon Region's guarantee scheme to receive the green light from the Commission.
With a budget of EUR 530 million, this scheme, consisting of four sub-measures (not cumulative with each other), will be implemented by SOWALFIN (SMEs), GELIGAR, a subsidiary of SRIW (large enterprises), SOGEPA (turnaround companies) and “Wallonie Santé”.
ANNABELLE LEPIÈCE assisted GELIGAR in the creation and notification to the Commission of its guarantee scheme under the state aid rules. She was assisted by BENOÎT VANDERVELDE for the banking aspects.
Who are the potential beneficiaries of the Walloon Region's guarantee scheme?
The potential beneficiaries are companies active on the territory of the Walloon Region, with the exception of banks and financial intermediaries.
The guarantee scheme comprises four sub-measures:
- “SME” measure is managed by SOWALFIN;
- “Large enterprises” measure is managed by GELIGAR;
- “Turnaround companies” measure was entrusted to SOGEPA for companies which are not covered by one of the other sub-measures;
- “Social action infrastructures and healthcare” measure within Wallonie Santé for companies which are not covered by one of the other sub-measures.
In accordance with the European Commission's Temporary Framework, the Region's guarantees can only be granted to companies that were not in difficulty within the meaning of the General Block Exemption Regulation ("GBER") on 31 December 2019. Please refer to our article on State guarantees on this subject.
What are the terms and conditions of the Walloon Region's guarantee scheme?
The measures consist in guaranteeing loans granted by commercial credit institutions and financial institutions acting as financial intermediaries.
Eligible loans :
- For SMEs and large firms, working capital (new or existing) and investment loans (existing) are eligible.
Existing investment loans based on predefined repayment schedules are eligible only on the explicit condition that credit or other financial institutions grant a moratorium on principal payments for a period of at least three months.
For other existing loans (without predefined repayment schedules), credit or other financial institutions must commit either to extend the duration of the loans or to respect the limits currently granted to make these loans eligible for guarantee cover. In any event, loans that are non-performing as of 31 December 2019 are not eligible for the guarantee in question.
- For turnaround companies and companies in the social and healthcare sector, new investment loans and new working capital, as well as granted credit lines, are eligible. This measure applies only to new (and not to existing) credits.
It should be noted that there is no maximum duration imposed on eligible loans, but the guarantee provided on such loans may not exceed six years.
The maximum amount of eligible loans may in accordance with the Commission's Temporary Framework not exceed:
- twice the beneficiary's annual wage bill (including social security charges and the cost of personnel working on the company's site but formally employed as subcontracted personnel) for 2019 or the last year available. In the case of enterprises set up on or after 1 January 2019, the maximum loan must not exceed the estimated annual wage bill for the first two years of operation; or
- 25 % of the beneficiary's total turnover in 2019; or
- on the basis of self-certification by the beneficiary of its liquidity needs and a case-by-case assessment, the amount of the loan may be increased to cover liquidity needs from the date of the loan (for the next 18 months for SMEs and for the next 12 months for large companies).
In any event, the maximum amount of a loan eligible for the guarantee is limited to EUR 7.5 million for SMEs, while the maximum loan amount for GELIGAR guarantees for large companies is EUR 10 million. The same limits also apply to turnaround companies and social and healthcare organisations, depending on the nature of the companies.
The maximum amount of the guarantee is 90% of the loan. Potential final losses will be divided proportionally between the financial intermediaries and the Walloon Region.
The guarantee premium to be paid differs according to the different measures:
- For SMEs: the annual guarantee premium will generally be between 100 and 110 basis points, irrespective of the maturity of the underlying loan. The minimum premiums applicable are calculated on the basis of the duration of the guarantee: 25 basis points (for loans with a duration of 1 year), 50 basis points (for loans with a duration of 2 to 3 years) and 100 basis points (for loans with a duration of 4 to 6 years) ;
- For large companies: 50 basis points (for 1 year credits), 100 basis points (for 2 to 3 year credits) and 200 basis points (for 4 to 6 year credits).
- For turnaround companies and for social action and health care organisations: the annual guarantee premium is defined according to the duration of the guarantee and the nature of the commitments :
- For SMEs: at least 25 basis points (for credits with a duration of 1 year or less), 50 basis points (for credits with a duration of 2 to 3 years), and 100 basis points (for credits with a duration of 4 to 6 years).
- For large companies: at least 50 basis points (for credits with a maturity of one year or less), 100 basis points (for credits with a maturity of 2 to 3 years), and 200 basis points (for credits with a maturity of 4 to 6 years).
With the exception of the GELIGAR guarantee, the guarantees of the Walloon Region cannot be combined with those of the State.
The Commission considered that the measures were in line with the conditions set out in the Temporary Framework (see our article of 7 April 2020 on the Temporary Framework).
The Commission therefore concluded that the measures were necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State in accordance with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.
It is now up to the financial institutions to analyse the applications submitted by the companies and to request the guarantee from the Walloon Region.
Further information on the measures taken in Belgium and other EU jurisdictions can be found in our CMS Expert Guide to State Aid During Coronavirus Crisis.