On 10 August 2020, the European Commission uploaded on its website the public versions of 2 clearance decisions regarding Romanian State aid support measures in the context of the COVID-19 pandemics:

  1. amendments to IMM Invest Romania[1] - the SME-dedicated support scheme operational since the end of April - (i.e.: Commission Decision no. C(2020) 5555 final/7.08.2020 regarding SA.57572 COVID-19: Amendment of SA.56895 (2020/N) - Romania - Support scheme for SMEs); and
  2. the long-awaited RON 4 billion (approximately Eur 800 million) support scheme dedicated to large enterprises and SMEs with a 2019 turnover exceeding RON 20 million (i.e.: Commission Decision no. C(2020) 4565 final/1.07.2020 regarding SA.57408 COVID-19: Framework scheme for State aid in the form of subsidized loans and guarantees on loans).

Although these 2 sets of measures proposed by the Romanian Government under the European Commission’s State aid Temporary Framework[2] (“TF”) in the context of the liquidity shortage caused by the COVID-19 pandemics may seem similar, as they both concern State guarantees and subsidized interests for loans, there are important differences to bear in mind. The most important such difference is that in the case of the aid for the SMEs State guarantee and subsidized interest in respect of the same loan may be cumulated subject to the EUR 800,000 limit per beneficiary, while in case of  large enterprises and SMEs with a 2019 turnover exceeding RON 20 million, these support measures may not be cumulated in respect of the same loan, cumulation being however allowed for separate loans, as long as the aggregate value of such loans does not exceed the maximum loan amount calculated according to the criteria set forth in  the clearance decision in line with the TF.

Key conditions

Otherwise, the support scheme applicable to large enterprises comprises the following key elements:

  • aid must be granted before December 31, 2020;
  • beneficiaries may be large undertakings or SMEs with a 2019 turnover exceeding RON 20 million acting in a wide variety of sectors (the exclusions are very limited and concern: gambling and betting industries, manufacturing and distribution of weaponry, ammunition, explosives, tobacco, alcohol, substances under national control, herbs, narcotic and psychotropic substances and formulas; investigative and protection services; real estate transactions; and financial intermediation and insurance);
  • in order to be eligible, entities must comply with rather standard requirements regarding: good standing (must not have been in difficulty as of December 31, 2019, must not be subject to foreclosure, winding-up, agreement with creditors, insolvency or similar proceedings or to requests in respect thereof); absence of debts towards the State budget; absence of litigation with the administrator of the State aid scheme or the Romanian Ministry of Public Finances; and not being subject to a State aid recovery decision which has not been settled;
  • support under either form (State guarantee or subsidized interest) may be granted in respect of new or existing loans, investment loans or working capital loans, with a maximum maturity of 6 years;
  • loans benefiting from the support measures may be granted by any financial institutions including Eximbank;
  • as regards collateral, support under the form of subsidized interests must be secured with collateral covering at least 100% of the principal, while the authorities still have the option to request a certain level of collateralization in respect of loans that are subject to State guarantee;
  • the maximum amount of the loans in respect of which support is granted must not exceed: (i) double the annual wage bill of the beneficiary (including social charges, as well as the cost of personnel working on the undertaking’s site but formally in the payroll of subcontractors) for 2019 or for the last year available[3]; or (ii) 25% of the beneficiary’s total turnover in 2019; or (iii) the beneficiary’s liquidity needs (based on self-certification) for the coming 18 months for SMEs and for the coming 12 months for large enterprises, computed as of the moment when the aid is granted. Last threshold may however be used only exceptionally where, due to the specific sector or specific circumstances under which the potential beneficiary is performing its activity, the limits provided under (i) or (ii) above are not appropriate to forecast the liquidity needs in the next months.
  • specific conditions and requirements applicable in respect of the support measure consisting in State guarantee for loans:
    • level of guarantee: the level of guarantees is of maximum 90% of the loan principal for new loans and of maximum 50% for existing loans, with the Romanian state and the financial institution granting the loan incurring losses proportionally and under the same conditions;
    • the interest rate for new loans must not exceed the standard interest rate the financial institution would have applied before the COVID-19 outbreak for a loan with a risk profile equivalent to that of the guaranteed loan;
    • for existing loans, the guarantees will be granted where (i) upon the beneficiary`s request, the financing institution amends the loan contract to more favourable terms for the beneficiary (increase in value, extending maturity of the loan, etc.) or (ii) where there would be a loss of value of collateral which would contractually allow the financing institution to revisit the conditions of the loan, the latter commits to at least maintain the original conditions of the loan (i.e. not to decrease the amount of the loan and/or not to increase its costs contrary to what would have been foreseen contractually);
    • guarantee term: maturity of the loan, but the term may not exceed 6 years.
    • guarantee premium: to be established based on a step-up approach, modulated according with the TF requirements, depending on the guaranteed amount and the years, with different thresholds for SMEs and large enterprises; the premium levels range between (i) 0.15% for SMEs for Year 1 and a guaranteed amount of maximum 50% of the loan principal and (ii) 2% for large undertakings for Year 4 - 6 and a guaranteed amount between 75% and 90% of the loan principal;
  • specific conditions and requirements applicable in respect of the support measure consisting in subsidized interest for loans including the annual interest rate for the loans benefiting from the subsidized interest equals to: the base rate of 3-month ROBOR applicable when the interest is due, provided however that it is at least equal to 2.35% (i.e. the 1-year ROBOR applicable for June 17, 2020) plus a credit risk margin, modulated according with the TF requirements, depending on the duration of the loan and the type of beneficiary ranging between 0.25% for Year 1 in respect of SMEs and 2% for Year 4 - 6 for large undertakings;

Unlike the SME-dedicated program IMM Invest Romania[4], this State aid support scheme will be implemented by the Romanian Export-Import Bank - Eximbank S.A. (a specialized credit institution carrying out both commercial activities similar to a regular credit institution and activities in the name and on behalf of the Romanian State), acting through its division dedicated to financing, guarantees, insurance in the name and on the account of the State (EximBank - DFGANCS).

Next steps

There are still steps to be taken in view of a functional and operational legal framework for the actual implementation of the support scheme.

In this sense, at the end of July, the Romanian Government has amended, through Government Emergency Ordinance no. 127/2020, the law regarding the organization and functioning of the Export-Import Bank of Romania EXIMBANK - S.A. (Law no. 96/2000) with the purpose of including specific provisions on EximBank’s attributions of implementing State aid measures and allowing EximBank to direct existing funds and new budgetary allocations to financial instruments dedicated to companies affected by COVID-19 pandemics.

GEO no. 127/2020 expressly states that the Norms regulating the activities carried out by EximBank in the name and on the account of the State would be approved by the Inter-ministerial Committee for Financing, Guarantees and Insurance (ICFGI), a committee made up of representatives of central public administration specialized bodies and of EximBank.

On 13 August 2020, a draft Government decision amending the current regulation on the organization and functioning of ICFGI (i.e. GD no. 534/2007) in order to prepare the implementation of the state aid scheme was published for public debate. According to this draft, the Regulation regarding the carrying out, by EximBank, of activities in the name and on the account of the State, should be approved by ICFGI within 60 days from the approval of the Government decision amending GD 534/2007.

The state aid scheme will become applicable only once the aforementioned regulation will be approved and published with the Official Gazette (no draft thereof being available at the date of this article). It follows that, while the publication of the European Commission’s clearance decision sheds significant light on key conditions and requirements of the support scheme (such needing to be reflected in the document approving the support measure at the national level), there are still major steps and actions to be taken by Romanian authorities in order to render the State aid support scheme for large undertakings and SMEs with a 2019 turnover exceeding RON 20 million operational. Considering also the conditions for the applicability of the state aid scheme and more specifically the deadline of 31 December 2020 deadline for the granting of the aid, it is important that the missing pieces of the puzzle are completed sooner rather than later in order for this measure to be useful to Romanian companies.