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Restoring liquidity for enterprises

In August 2009, the Austrian legislator took further action to mitigate the effects of the global financial crisis on the real economy.

Subject to certain conditions set forth in the new Liquidity Support Act for Enterprises (Unternehmensliquiditätsstärkungsgesetz), qualifying enterprises may apply for a state guarantee backing external bank financings.

Guarantees will be issued by Oesterreichische Kontrollbank AG on behalf of the Austrian state. Applications for a guarantee can be made by qualifying enterprises until November 12 2010.

The initiative serves as an interim measure to support liquidity of, and secure financings for, large enterprises considered as nationally or regionally important for the Austrian economy or for employment in Austria.

Qualifying enterprises

To qualify for the state guarantee scheme, the following preconditions set out in the Act must be met. The respective enterprise must have its corporate seat or establishment and key operations in Austria and it must not be part of the financial sector. Accordingly, credit institutions, insurance undertakings, investment firms or pension funds may not benefit from the state guarantee scheme. Further, the respective enterprise must not be a small or medium-sized enterprise as defined in the European Commission's Recommendation of May 6 2003. Prior to July 1 2008, the respective enterprise must have had a sound economic basis and it must be expected that the enterprise will be in a position to meet its financial obligations secured by the state guarantee.

Eligible financings

Financings eligible for state guarantee backing are working capital facilities, investment loans and loans taken out for the repayment of corporate bonds or existing loans. They must be denominated in euros and must be granted by a duly licensed domestic or EEA credit institution.

Maximum amount and further conditions

The maximum guarantee amount per group of companies is limited to €300 million whereby the guaranteed amount will not exceed 70% of the loan amount. In aggregate, the Austrian state may incur a total liability from guarantees under the Act of €10 billion.

The maximum term of each guarantee is limited to five years.

Enterprises benefitting from the guarantee scheme are required to pay an appropriate guarantee fee to the Austrian state, the amount of which is based on the rating of the respective enterprise.

Granting of the state guarantee is subject to various undertakings of the respective enterprise including information and certain inspection rights of the Austrian state as well as limitations on profit-based remuneration for senior management. Amongst others, no bonuses shall be paid out for the term the state guarantee is outstanding unless the guarantee fee is duly paid, profits are actually made, dividend distribution is not restricted and bonuses are set at appropriate levels.

Ursula Rath

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