Covid-19: Bridging loans and Guarantees

Autoren: Dr. Dominik Kurzmann; Dr. Lukas Röper; Matthias Konrad, LL.M.

The coronavirus has Austria firmly in its grip. The further spread of COVID-19 can have grave effects on the business and subsequently on the liquidity of domestic companies, confronting them with previously unimagined financial and liquidity challenges, which may threaten their existence. Currently, an obligation of the banks to grant a deferment in connection with loans is not foreseeable. Rather, such deferments will have to be negotiated with the respective bank. Additionally, there is a risk that banks may terminate existing loan agreements prematurely, due to important reasons such as the deterioration or endangerment of financial circumstances or may choose to demand payment due to default. In case of doubt, we recommend that contact is established with the banks as soon as possible. In order to ensure that companies survive this challenge as unscathed as possible, we have complied an overview of the support measures that Austrian companies can draw on in this exceptional situation.

Bridging loans from the Austrian Kontrollbank (“OeKB”)

Within the terms of the current situation and on behalf of the Federal Ministry of Finance, the OeKB provides Austrian export companies with bridging loans amounting to 10 to 15 percent of their export turnover, up to a maximum of EUR 60 million, for the purpose of securing business locations and jobs. In total, the available credit line comprises EUR 2 billion. Presently, companies can apply for loans with the help of their house bank – regardless of whether the respective company is already a customer of the OeKB. The financing is initially limited to a period of two years with the option of a subsequent extension.

Austria Wirtschaftsservice (“AWS”) Bridge-over Guarantees

Under certain conditions, small and medium sized enterprises (“SME”) as well as freelancers may benefit from the AWS bridging guarantees. The guarantees are provided by the AWS, which is a promotional bank of the Austrian Federal Government. A few days ago, the Austrian Federal Government decided to extend and simplify the guarantees in order to assist companies that are negatively affected by the coronavirus. Funding is provided for working capital financing, such as the purchase of goods or personnel costs, as well as financing for the deferral of existing loans. However, the measures must not lead to a mere rescheduling of debt but must also serve to secure and expand liquidity. All SME’s can apply for guarantees for up to 80% of loans of up to EUR 2.5 million and a having a maximum duration of 5 years. The application is submitted to the AWS by the financing bank.

The Austrian Hotel and Tourism Bank (“ÖHT”) Guarantee

In parallel, the Federal Ministry of Agriculture and Tourism, together with the ÖHT, has put together a package of measures for SME’s in the tourism and leisure industry. This enables affected companies to secure bridging finance from their house banks with the ÖHT providing guarantees of 80% of the new bridging loans with a term of 36 months. The maximum amount of liability is EUR 400,000 and the assumption of the costs of the one-off processing fee and the liability commission is also granted. In this case, such applications must be submitted directly to the ÖHT.

Additional measures

Furthermore, the Austrian Federal Government has promised to make available a package of measures worth up to EUR 38 billion. In this context, amendments were made to legislation regarding the winding down of state companies (“ABBAG”) act. The ABBAG’s corporate purpose has been modified to include the provision of services and the taking of financial measures in favour of Austrian companies which are necessary to maintain solvency and bridge liquidity difficulties. However, details of this financing option are yet to be published. It remains to be seen which companies will be among the beneficiaries, what form the aid measures will take, and what the amount and duration of the financial measures will be. It can be assumed that ABBAG will make use of an external service provider, such as OeKB, for the processing of these measures.

PwC Legal Austria will keep you informed of any changes.