EUROPEAN COMMISSION Brussels, 7.7.2020 C(2020) 4733 final In the published version of this decision, PUBLIC VERSION some information has been omitted, pursuant to articles 30 and 31 of Council This document is made available for Regulation (EU) 2015/1589 of 13 July information purposes only. 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […] Subject: State Aid SA.57637 (2020/N) – Belgium COVID-19: Recapitalisation of Aviapartner Excellency, 1. PROCEDURE (1) On 11 June 2020, Belgium pre-notified to the Commission an aid in the form of a convertible loan (“the measure” or “the Convertible loan”) from the State to Aviapartner Belgium SA/NV (“Aviapartner”), which is a Belgium-based ground handling service provider. By e-mails of 15, 22, 23, 24, 25, 26, 28, 29 and 30 June, Belgium submitted additional information. By electronic notification of 1 July 2020, Belgium notified the measure to the Commission as aid compatible with the internal market under Article 107(3)(b) of the Treaty on the Functioning of the European Union (“TFEU”). By e-mails of 1 and 2 July 2020, Belgium submitted additional information. Son Excellence Monsieur / Zijne Excellentie de Heer Philippe Goffin Ministre des Affaires étrangères et européennes / Minister van Buitenlandse Zaken en Europese Zaken Rue des Petits Carmes / Karmelietenstraat 15 B - 1000 Bruxelles / Brussel Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 (2) By letter dated 1 July 2020, Belgium exceptionally agreed to waive its rights deriving from Article 342 of the TFEU, in conjunction with Article 3 of Regulation 1/19581 and to have this Decision adopted and notified in English. 2. DESCRIPTION OF THE MEASURE 2.1. Objective of the measure (3) According to Belgium, the measure aims at restoring the structure of the share capital and the viability of Aviapartner in the exceptional situation caused by the COVID-19 outbreak. In particular, the measure will ensure that Aviapartner has sufficient liquidity to pursue its operations at Brussels Airport. (4) As from mid-March 2020, most Member States decided to limit or ban movement of persons due to the COVID-19 outbreak. In particular, on 20 March 2020, Belgium published a Royal Decree on temporary restriction of non-essential travel. Consequently, at Brussels Airport, passenger aircraft movements were therefore close to zero, except for limited repatriation flights, emergency medical flights or diplomatic flights. (5) Since the beginning of June 2020 and the relaxation of the containment measures, air passenger traffic has slowly recovered at Brussels Airport. However, Aviapartner does not have sufficient liquidity to finance the ramp up of its activities. As ground handlers are generally paid for their services with a delay, they require working capital funding to restore their activities. In particular, while salaries (about […]% of the costs) have to be paid without delay, customers delay their payments ([…]days). Moreover, with very low volumes of passenger traffic, ground handlers’ productivity is poor because staff members are idle between flights, which leads to very high costs (and therefore losses) per flight compared to the situation prior to the COVID-19 outbreak. (6) Despite a number of measures adopted by Aviapartner to cope with and survive the crisis caused by the COVID-19 outbreak, its revenues decreased dramatically. Consequently, Aviapartner faces serious financial difficulties and an acute lack of liquidity. According to the Belgian authorities, the liquidity position of Aviapartner is critical (EUR minus […]2 early June). (7) Belgium considers that a liquidity support is thus necessary to cover the gap in structural financial needs that will result from the consequences of the COVID-19 outbreak for 2020 and the beginning of 2021. In addition, Belgium considers that the use of a hybrid instrument (i.e. a convertible loan) is justified by the uncertainties that Aviapartner may face in the near future. The Belgian authorities consider that Aviapartner may encounter further financial difficulties due to the 1 Regulation No 1 determining the languages to be used by the European Economic Community, OJ 17, 6.10.1958, p. 385. 2 The liquidity position Aviapartner was calculated as the sum of Aviapartner’s net cash position on 31 December 2019 (i.e. EUR minus […]) and the monthly cash flows from January until May 2020 (i.e. EUR […]). 2 uncertainties about the recovery of the aviation sector (reduced traffic, late payments from its clients, potential bankruptcy of airlines, etc.). The Belgian authorities consider that the use of a convertible loan is justified as it will allow them to quickly strengthen the capital of the company if Aviapartner encounters further financial difficulties that could lead to default under the Convertible loan. (8) The measure is based on Article 107(3)(b) TFEU, in light of section 3.11 of the Temporary Framework.3 2.2. The nature and form of aid (9) The measure takes the form of a EUR 25 million State convertible loan with a maturity of seven years. (10) The Convertible loan is a hybrid instrument as the loan can potentially be turned into shares in the capital of Aviapartner at the request of the Belgian authorities (i) if an event of default is outstanding or (ii) after the final maturity date of the Convertible loan (i.e. until 31 December 2027). The conversion rights are optional for the Belgian authorities. There is no automatic conversion mechanism and the conversion rights belong exclusively to the Belgian authorities. 2.3. Legal basis (11) The national legal basis for the measure is Article 2, §3 of Law of 2 April 1962 relating to the Federal Holding and Investment Company and to the regional investment companies4 together with a Royal Decree providing on that basis a dedicated assignment (“mission déléguée”/“gedelegeerde opdracht”) to the Federal Holding and Investment Company (“SFPI-FPIM”)5. The Belgian authorities provided a draft of that Royal Decree, which they will adopt once the Commission approves the aid measure. 2.4. Administration of the measure (12) The granting authority is the Belgian State, through its investment vehicle, SFPI- FPIM. The measure will be administered by SFPI-FPIM, acting in its own name but on behalf of the Belgian State. 3 Communication from the Commission - Temporary framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 91I, 20.3.2020, p. 1, as amended by Communication from the Commission C(2020) 2215 final of 3 April 2020 on the Amendment of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 112I , 4.4.2020, p. 1, by Communication from the Commission C(2020) 3156 final of 8 May 2020 on the Amendment of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 164, 13.5.2020, p. 3, and by Communication from the Commission C(2020) 4509 final of 29 June 2020 on the Amendment of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 218, 2.7.2020, p. 3. 4 Law of 2 April 1962 enacted in the Belgian State Gazette http://www.ejustice.just.fgov.be/cgi_loi/change_lg.pl?language=fr&la=F&cn=1962040231&table_na me=loi 5 Société Fédérale de Participations et d'Investissement - Federale Participatie en Investeringsmaatschappij 3 2.5. Budget and duration of the measure (13) The Convertible loan will amount to EUR 25 million with a maturity of seven years. (14) Aid may be granted under the measure as from its approval until no later than 30 June 2021. 2.6. Beneficiary (15) The beneficiary of the measure is Aviapartner, a ground handling service provider at Brussels Airport. (16) Save for a temporary license granted to Alyzia, Aviapartner is currently the only ground handling company at Brussels Airport since Swissport BE, the other ground handler at Brussels Airport, declared bankruptcy on 8 June 2020. Aviapartner has around 900 employees. (17) Aviapartner is a subsidiary of Aviapartner Holding NV, which is a Belgian company providing aircraft ground handling services across 37 airports in 6 Member States (Belgium, France, Germany, Italy, Spain and the Netherlands). The other subsidiaries of Aviapartner Holding NV will not benefit from the notified measure. (18) The measure is granted directly by the State to the beneficiary acting through SFPI- FPIM. 2.7. Basic elements of the measure (19) The Convertible loan will amount to EUR 25 million with a maturity of seven years and repayments of principal in […]as from 31 December 2023. (20) The interest rates for the Convertible loan will be paid through a coupon payable quarterly at a rate equal to aggregate EURIBOR plus a margin of […] bps for the first year, […]bps for the second and third year, […]bps for the fourth and fifth year and […] bps for the sixth and seventh year. (21) The Convertible loan is fully senior to ordinary equity. (22) The Belgian authorities confirmed that, in accordance with the Temporary Framework, the Convertible loan will be reimbursable voluntarily at any moment by Aviapartner. (23) The Convertible loan may be converted into shares in the capital of Aviapartner at the request of the Belgian authorities (i) if an event of default is outstanding (i.e. non-payment, breach of the conditions set out in the Temporary Framework, insolvency proceedings, misrepresentation, cessation of business activities) or (ii) during a six months period after the final maturity date of the Convertible loan (i.e.