The European Commission issued a release on 17 September 2020 announcing its approval of an Italian recapitalisation scheme to support large companies affected by the COVID-19 pandemic.
State aid: Commission approves €44 billion Italian recapitalisation scheme to support large companies affected by coronavirus outbreak
The European Commission has approved an Italian scheme, with an overall budget of €44 billion, to support large enterprises affected by the coronavirus outbreak. The scheme consist of four measures that were approved under the State aid Temporary Framework.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "This Italian recapitalisation scheme will support large companies affected by the coronavirus outbreak by strengthening their capital base and facilitating their access to finance in these difficult times. Together with other previously approved measures, the scheme will ultimately be instrumental in supporting the Italian economy and labour market. We continue to work in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules."
The Italian support measures
Italy notified to the Commission, under the Temporary Framework, a scheme consisting of four complementary measures to support large companies particularly affected by the coronavirus outbreak, through recapitalisation instruments, in particular equity, and hybrid capital instruments (convertible bonds and subordinated debt). Together with the Italian scheme intended for small and medium-sized enterprises, approved by the Commission on 31 July 2020, the Italian measures aim to support the solvency of a large spectrum of companies that have suffered from the coronavirus outbreak, thus helping them to ensure the continuation of their activities and supporting employment.
The scheme targets large companies that have faced a severe reduction of revenues in 2020. To be eligible, among other criteria, the companies should be considered strategic for the economy and for the labour markets.
The measures under the scheme consists of:
(1) equity injections;
(2) mandatory convertible bonds;
(3) convertible bonds, upon request of either the beneficiary or the bondholder;
(4) subordinated debt.
The four measures are administrated by an ad-hoc special purpose vehicle, "Patrimonio Rilancio".
The Commission found that the scheme notified by Italy is in line with the conditions set out in the Temporary Framework. In particular, with respect to recapitalisation measures, (i) the support is available to companies if it is needed to maintain operations, no other appropriate solution is available, and it is in the common interest to intervene; (ii) support is limited to the amount necessary to ensure the viability of beneficiaries and does not go beyond restoring their capital structure before the coronavirus outbreak; (iii) the scheme provides an adequate remuneration for the State; (iv) the conditions of the measures incentivise beneficiaries and/or their owners to repay the support as early as possible (inter alia through progressive increases in remuneration, a dividend ban as well as a cap on the remuneration of and a ban of bonus payments to management); (v) safeguards are in place to make sure that beneficiaries do not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the internal markets, such as an acquisition ban to avoid aggressive commercial expansion; and (vi) aid to a company above the threshold of €250 million has to be notified separately for individual assessment.
With respect to aid in the form of subordinated debt instruments, (i) aid will not exceed the relevant limits on turnover and wage bill of the beneficiaries set out in the Temporary Framework and (ii) support can only be granted until the end of 2020.
Finally, only companies that were not considered to be in difficulty already on 31 December 2019 are eligible for aid under this scheme.
The Commission concluded that the scheme 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 measure under EU State aid rules.