For the purpose of compensating for liquidity shortages due to short-term decreases in turnover, Österreichische Hotel- und Tourismusbank Ges.m.b.H. (ÖHT) provides guarantees for bridge financings to the hotel and tourism industry.

Providing a collateral for the guarantee issued by ÖHT is not necessary.^[1] In any case, the beneficiary of the guarantee may use either “new or re-usable collateral” to cover its own risk amounting to (at least) 20%.^[2]

Assigning (indirect) claims which exist vis-à-vis ÖHT (the guarantee exists only vis-à-vis the beneficiary of the guarantee which is normally the bank) is not admissible without the approval of ÖHT. 

In detail:

Clause 4.1.10 (bridge financings (Überbrückungsfinanzierungen)) of the ÖHT guidelines sets out the COVID-19-related rules for guarantees granted for the purpose of providing bridge financings to the hotel and tourism industry (additional debt capital which, against the back-drop of the current COVID-19 crisis, is meant to finance operating resources and compensate for liquidity shortages caused by short-term decreases in turnover).^[3]

The prerequisite for granting a guarantee is that (a) there is no need for restructuring within the meaning of the Guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty as amended from time to time, most recent version OJ No. C 249 of 31 July 2014, p. 1 et seqq., and (b) a decrease in turnover by at least 15% compared to the previous year is expected. The guarantee is issued for a maximum of three years (Clause 9 – Duration and termination of the guarantee).

Pursuant to section 10 (Type and application) subsection 2 para 3 of the ÖHT guidelines, the guarantee shall cover up to 80% of the debt capital provided, with the guarantee quota being explicitly determined in the respective guarantee offer. “Under certain circumstances”, providing a guarantee may be linked to the condition that credit repayments or partners’ shares are first credited towards the part of the capital which is securitised by a guarantee (section 10 subsection 2 last paragraph ÖHT guidelines). The bank’s liability claims (referred to as “funding recipient” in the ÖHT guidelines) vis-à-vis ÖHT may only be assigned after obtaining the bank’s approval (section 10 subsection 3 ÖHT guidelines).

In case the event constituting grounds for a guarantee to be drawn occurs, the capital provider is compensated in the amount of the liability quota for the receivables lost despite drawing on all of the residual collateral.

In the financing agreement, the beneficiary shall, inter alia, obligate the applicant to reach an agreement with ÖHT each time before granting a credit to enterprises or individuals holding shares in their enterprise, or to enterprises in which they hold more than 50% of the shares, as well as each time before assuming a guarantee for liabilities of the afore-mentioned enterprises or individuals, insofar as such granting of credits or providing of guarantees is to be considered unusual (cf. Clause 20.1 - Obligations of the funding recipient; in addition to further restrictions, comprehensive restrictions with regard to restructurings have also been established).

The Obligations of the beneficiary set out in Clause 20.3. of the ÖHT guidelines include, inter alia, the obligations on the part of the beneficiary (a) to at least take in the collateral determined in consultation with ÖHT, (b) to obtain the approval of ÖHT before making the capital securitised by a guarantee due and payable, (c) to set up a separate account in the name of the funding recipient for the capital securitised by a guarantee being booked to this account, and, inter alia, for crediting all earnings to this account resulting from the realisation of collateral, and (d) to realise collateral, in agreement with ÖHT, which was required for obtaining the credit securitised by a guarantee and provided for the benefit of the beneficiary of the guarantee.

Prerequisites under state aid law

Admissibility of providing a guarantee in combination with a (bridge) financing under state aid law shall be determined by assessing whether such measure is in conformity with the framework conditions set out under state aid law.

In general, the Commission will consider state aid in the form of state (loan) guarantees as compatible with the internal market on the basis of Article 107(3)(b) TFEU, provided that the following conditions are met: ^[4]

• Guarantee premiums are set at the following minimum levels (as an alternative, Member States may notify schemes, considering the below table as a basis, where-by guarantee duration, guarantee premiums and guarantee coverage may be modulated; for example lower guarantee coverage could offset a longer duration):

Credit risk margin for loan durations

• The guarantee is granted on 31 December 2020 at the latest.
• For loans with a maturity date after 31 December 2020, the loan amount shall not exceed
  • double the annual wage bill of the beneficiary (including social charges and the cost of personnel working on the enterprise’s site but formally in the payroll of subcontractors) for 2019, or for the last year available. In the case of enterprises established on or after 1 January 2019, the loan must not exceed the estimated annual wage bill for the first two years in operation;
  • 25% of the beneficiary’s total turnover in 2019; or
  • in cases of appropriate justification and based on self-certification by the beneficiary of its liquidity needs, the amount of the loan may be increased to cover the liquidity needs from the moment of granting for the following 18 months for SMEs and for the following 12 months for large enterprises.
• For loans with a maturity until 31 December 2020, the loan principal may be higher than as described in (iii) with appropriate justification and provided that the proportionality of the aid remains assured.
• The term of the guarantee is limited to a maximum of six years, and the state guarantee may not exceed
  • 90% of the loan principal where losses are sustained proportionally and under the same conditions by the credit institution and the State; or
  • 35% of the loan principal, where losses are first attributed to the State and only then to the credit institutions (i.e. a first-loss guarantee);and, in both of the above cases (a and b), the amount covered by the guarantee must decrease proportionally when the loan principal decreases over time, for example, due to repayments being made.
• The guarantee may apply to investment as well as to working capital loans.
• The guarantee may be granted to enterprises which were not in difficulty (within the meaning of the General Block Exemption Regulation) on 31 December 2019; it may be granted to enterprises which are not in difficulty and/or to enterprises which were not in difficulty on 31 December 2019, but which were or have gotten in difficulty after said date due to the COVID-19 outbreak.

[1]      cf. FAQ for banks as at 4 April 2020 (https://www.oeht.at/produkte/coronavirus-massnahmenpaket-fuer-den-tourismus/, available in German only): “We do not request any form of collateral for our guarantees. Neither collateral in rem nor the entrepreneur assuming personal liability is required. By this, we explicitly enable our partner institutes to make use of new collateral and/or reusable collateral to cover their own risk amounting to 20%.”

[2]      80% of the bridge financing granted by the house bank are securitised by way of a federal guarantee issued by the Republic of Austria. This means that providing equity for this portion of the credit, pursuant to the Capital Requirements Regulation (CRR), is not necessary, and furthermore, that no additional collateral is requested by ÖHT for said portion of the credit (cf. FAQ for enterprises and separate FAQs for banks as at 4 April 2020, https://www.oeht.at/produkte/coronavirus-massnahmenpaket-fuer-den-tourismus/, available in German only).      

[3]      Applications are to be submitted using the online form at ÖHT’s website (www.oeht.at). The bundle of measures agreed for the tourism industry in response to the coronavirus may not be combined with other funding products offered by ÖHT. In the FAQs for banks as at 4 April 2020, the following is stated with regard to the assessment and management obligations applying to the application procedure: “Also verifying the prerequisites for funding (in particular meeting the criteria of the Company Reorganisation Act (Unternehmensreorganisationsgesetz, URG) at least in part, membership of the tourism and leisure division of the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKO) and holding a valid business licence) is carried out by ÖHT and is thus our responsibility.”

[4]      Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, Communication from the Commission of 19 March 2020 C (2020) 1863 final, paragraph 24 et seqq.