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MEMO/09/87

Brussels, 27th February 2009

State aid: Additional information on guarantees adopted under the Temporary Framework

(See also IP/08/1993)

The Commission has today approved three aid schemes which allow State aid to be granted in the form of guarantees on working capital or investment loans in Germany (IP/09/331), France (IP/09/332) and the United Kingdom (IP/09/333).

This MEMO sets out additional information about the key conditions of the guarantees.

The guarantee premium should be calculated according to the rating of the company on the date of the transaction in accordance with safe harbour premiums in the table overleaf.

These safe harbour premiums may be applied for a maximum period of 10 years from the date of the guarantee.

Nevertheless, only for the first two years these safe harbour premiums may be reduced by 15% of the cost of the premium for large companies and 25% for SMEs.

The underlying loan must be granted before 31 December 2010 and its total size may not exceed the annual wage bill of the company, including social charges.

Safe-harbours Temporary Framework in basis points*
Rating category
(Standard & Poor's)
Collateralisation**
High
Normal
Low
AAA
40
40
40
AA+
AA
AA-
40
40
40
A+
A
A-
40
55
55
BBB+
BBB
BBB-
55
80
80
BB+
BB
80
200
200
BB-
B+
200
380
380
B
B-
200
380
630
CCC and below
380
630
980

* For companies which do not have a credit history or a rating based on a balance sheet approach (such as certain special purpose companies or start-up companies), Member States may grant a reduction up to 15% (25% for SMEs) on the specific safe-harbour premium set at 3,8 % in the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (OJ C 155, 20.6.2008). However, the premium can never be lower than the premium which would be applicable to the parent company or companies.

The premiums in the table refines the safe-harbour provisions of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (OJ C 155, 20.6.2008) by taking account of different levels of collateralisation.

The calculation of the safe-harbour premiums is based on the margins provided by the Commission Communication on the revision of the method for setting the reference and discount rates (OJ C 14, 19.1.2008, p. 6), taking account of an additional reduction of 20 basis points (see footnote 11 of the Commission Communication on the revision of the method for setting the reference and discount rates).

For each rating category, however, the safe-harbour premium as set out in the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (OJ C 155, 20.6.2008) remained the upper premium limit for each rating category. As to the definition of the different levels of collateralisation see footnote 2, page 3 of the Commission Communication on the revision of the method for setting the reference and discount rates (OJ C 14, 19.1.2008, p. 6).

** Normal collateral should be understood as the level of collateral normally required by financial institutions as a guarantee for their loan. The level of collaterals can be measured as the Loss Given Default (LGD), which is the expected loss in percentage of the debtor's exposure taking into account recoverable amounts from collateral and the bankruptcy assets; as a consequence the LGD is inversely proportional to the validity of collaterals. For the present communication it is assumed that "High" collateralisation implies an LGD below or equal to 30 %, "Normal" collateralisation an LGD between 31 % and 59 %, and "Low" collateralisation an LGD above or equal to 60 %. For more details, on the notion LGD, see Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework — Comprehensive Version, available on:

http://www.bis.org/publ/bcBS128.PDF


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