Commission approves Bavarian fund to enable up to €46 billion of liquidity and capital support to enterprises in Bavaria in the context of the #Coronavirus outbreak

The European Commission has approved German plans to set up a €46 billion fund at the level of the German State (Land) of Bavaria (‘BayernFonds') to provide guarantees and invest through debt and equity instruments in enterprises affected by the coronavirus outbreak in Bavaria. The scheme was approved under the state aid Temporary Framework.

Under the scheme, the support will take the form of (I) guarantees (that are expected to mobilize €26bn), as well as (II) subsidized debt instruments in form of subordinated loans, and (III) recapitalization instruments (in total up to €20bn), in particular equity instruments (acquisition of newly issued ordinary and preferred shares or other forms of shareholding) and hybrid capital instruments (namely convertible bonds and silent participations).

The Commission found that the Bavarian scheme notified by Germany is in line with the conditions set out in the Temporary Framework. The Commission concluded that the Bavarian scheme will contribute to managing the economic impact of the coronavirus outbreak in Bavaria. Furthermore, it is necessary, 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 scheme under EU state aid rules.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This Bavarian fund will mobilize €46bn of liquidity and capital support to help medium-sized enterprises that are particularly important for the real economy of Bavaria to weather the crisis. The measure ensures that the state is sufficiently remunerated for the risk taxpayers assume, and, as regards recapitalization measures, that there are incentives for the state to exit as soon as possible, and that the support comes with adequate conditions, including a ban on dividends, bonus payments as well as further measures to limit distortions of competition. We continue to work closely with member states to ensure that national support measures can be implemented as quickly and effectively as possible, in line with EU rules.”

A full press release is available online.

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