1. State guarantees for the semiconductor industry
with special reference to Europe
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2. Objective of this Presentation
Information about WTO frame
Information about EU conditions for subsidies, state guarantees / bailouts, for different cases.
EU strictly regulates subsidies in line with WTO.
Bailouts for commodity producers are possible (one time measure)
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3. Regulations for Subsidies
WTO: Marrakesh agreement
Europe: four avenues
Subsidies for investments in less developed regions
State guarantee for other purposes
Bailout to prevent insolvency
State support measures within the temporary framework
Appendix:
Safe harbour premiums for state guarantees in Europe
Definition: firm in difficulty
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4. WTO: Marrakesh agreement on subsidies and CV measures
Subsidies for commodity producers may not enlarge market share. They are not prohibited, but can be challenged.
Subsidies are allowed in less developed regions.
Subsidies are allowed for investments caused by new environmental legislation.
Subsidies (rescue bailouts) are allowed for firms in difficulty if one time measures, which are non recurrent and may not be repeated for this enterprise.
For details see:
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5. Europe: Subsidies for investments in less developed regions
Subsidy intensity depends on regional BIP. Intensity varies between 0 and 40%.
Subsidy intensity decalage for investments bigger than € 50‘. Subsidy intensity for big investments (>1 bn €) varies between 0 an 13%.
Different parts of a subsidy package (grants, tax reductions, guarantees) are reflected by the EU Commission within the evaluation process.
State guarantee may be part of subsidy package.
State guarantee is free of charge, but reduces other subsidies (grants, tax reductions) by safe harbour premium.
Guarantee may cover 80% of a private loan.
The „value“ (safe harbour premium) of the guarantee depends on credit rating of the firm (see apendix).
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6. Europe: state guarantee for other purposes (loan for R+D or ESH)
Not common
guarantee price (safe harbour premium) depends on rating.
Bottom line often not better than normal loan.
80% of private (bank) loan covered by guarantee.
Due diligence of business plan.
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7. Europe: Bailouts to prevent insolvency
Status of the company: firm in difficulty
Company must be restructured, reduce market share.
Very close observation of EU commission.
One time measure.
Owners of the firm must contribute to restructuring.
Not for startups or companies just spinned off.
Due diligence of business plan.
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8. Europe: state support measures within the temporary framework
EU eased bailout conditions after the financial crisis for the years 2009 and 2010 (stimulus).
Only for firms not in difficulty until mid See definition for firm in difficulty!
Guarantee can cover up to 90% of the loan.
Cost of guarantee (safe harbour premium) 15% lower than in former years.
Same due diligence process as for state guarantees for other purposes.
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9. Safe harbour premiums for guarantees
Safe-harbours Temporary Framework in basis points*
Rating category (Standard & Poor's)
Collateralisation**
High
Normal
Low
AAA 40
AA+ AA
AA- A+ A A- 55
BBB+
BBB
BBB- 80
BB+ BB
200
BB- B+
380 B B-
630
CCC and below
980
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10. Definition: firm in difficulty
a limited company where more than half of its registered capital has disappeared and more than one quarter of that capital has been lost over the preceding twelve months;
an unlimited company where more than half of its capital has disappeared and more than one quarter of that capital has been lost over the preceding twelve months;
a company fulfilling the criteria of insolvency under its domestic law.
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