Shearman And Sterling


April 03, 2020

COVID-19 | Germany: Availability of Government Support for Infrastructure Businesses


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Government Support for German Infrastructure through COVID-19

The German Federal Government has introduced several initiatives to increase the liquidity of businesses during the COVID-19 crisis.

Setting aside tax support, the measure that is of most relevance to infrastructure assets is the “Economic Stabilization Fund (Wirtschaftstabilisierungsfonds, WSF)” consisting of:

  • EUR 400 billion state guarantees for liabilities, including bonds, notes and loans.
  • EUR 100 billion for direct state investments.
  • EUR 100 billion for funding from KfW.

The Federal Ministry of Economy and Energy has particularly stressed that this support applies (amongst others) to companies in the field of critical infrastructure. The Federal Government will be using the Sonderfonds Finanzmarktstabilisierung (“SoFFin”)—the special financial market stabilization fund—which has already worked in the financial crisis, to deploy its guarantees and direct state investment capabilities. 

KfW in turn, has opened up and widened the access conditions of their existing programs for businesses. In addition, on March 23, 2020, the KfW Syndicate Program was launched to further assist companies through the COVID-19 crisis.

In this article, we consider:

  • the state guarantee program;
  • the KfW special programs for young and established companies; and
  • the KfW Syndicate Program,

assessing their suitability for German infrastructure businesses that qualify as large businesses under the programs. These are businesses with more than 249 employees or more than EUR 50 million in annual revenues and more than EUR 43 million in total assets, which criteria we expect the majority of infrastructure businesses to satisfy.

Notwithstanding this, the Interministerial Economic Stabilization Fund Committee may, at its sole discretion, allow applications from businesses, which do not meet the above eligibility criteria if the company is active in a sector critical to infrastructure.

What is the State Guarantee Program? 


The WSF will provide guarantees of up to EUR 400 billion for liabilities including bonds, notes and loans issued between March 28, 2020 and December 31, 2021. 

Eligibility criteria

At the time of application, a business:

  • may not have any other financing alternatives;
  • as a result of the stabilization measures, must be likely to continue to operate post the COVID-19 crisis; and
  • as of December 31, 2019, may not have qualified as a company in financial distress.

Key terms

Term—The term of the guarantees may not exceed 60 months.

Fees—Companies must pay a guarantee fee in line with market conditions.

Further details on the administration of the scheme should become available soon.

What is the KfW COVID-19 Support?

  • KfW special programs for young and established companies


These programs are based on KfW’s existing ERP Start-Up Loan and Entrepreneur Loan programs which have been opened up to a wider pool of companies as of last week. The two programs are largely the same, except that the special program for young companies is available to businesses that have operated for up to five years and the program for established companies is available to businesses that have operated for more than five years. 

Eligibility criteria

The programs are available to any commercial business that is majority privately owned with a seat in Germany that:

  • as of December 31, 2019, was not in financial difficulty and showed stable economic conditions. This is satisfied where the financial institution applying on the borrower’s behalf (see below on the application process) has no knowledge of unregulated payment arrears by the borrower of more than 30 days, existing deferral agreements or covenant violations as at December 31, 2019;
  • at the time of application, adjusted for the pre-crisis condition, the entity is expected to meet its payment obligations until December 31, 2020 and be likely to continue to operate post the COVID-19 crisis.

The financing is available for substantially all types of infrastructure businesses. The main exceptions relevant for the infrastructure businesses would be nuclear power plants and coal-fired power, heat and CHP plants (although even these may benefit from KfW support in some instances).

The programs are not available for debt restructuring or refinancing of completed projects.

Key Terms

Purpose—The program can be used to finance acquisitions, capital expenditure and working capital.

Structure—KfW will advance to the fronting bank the total facility amount. The fronting bank will advance the funds to the borrower. If the borrower defaults on its payment obligations to the fronting bank, KfW will take the risk of the borrower’s non-payment in an amount of up to 80% of the fronting bank’s final loss (after taking into account any security and guarantee). Thus, the fronting bank would only need to repay KfW the higher of (i) 20% of the aggregate of the outstanding amount advanced to it by KfW and any accrued but unpaid interest and (ii) the amount recovered from the borrower. If the proposed loan is syndicated, each of the lending banks will need to act as a fronting bank in relation to its commitments and will be covered by KfW individually.

Term—The term of the financing will depend on its purpose and circumstance but the below should largely apply:

  • Capital investments and acquisitions—up to five years with a maximum of one repayment free year and a fixed interest rate for the whole term.
  • Working capital—up to two years with a bullet repayment and a fixed interest rate for the whole term or up to five years with a maximum of one repayment free year and a fixed interest rate for the whole term.

Availability period—The availability period is 12 months after approval. 

Pricing—The interest rate will be 2%, except for the borrowers in the lowest credit group according to the KfW assessment scale; these will be subject to interest of 2.12%. Commission of 0.15% per month on any undrawn amounts is payable starting six months and two working days after the approval. There is an early repayment penalty, which will be determined by the fronting bank.

Commitment—The commitment cannot exceed EUR 1 billion for a group of companies and will be further capped at the higher of the below amounts (Funding Caps):

  • 25% of the group’s annual revenues in 2019;
  • double the group’s cost of wages in 2019; or
  • the liquidity requirements of the group for the next 12 months.

In addition, loans over EUR 25 million cannot exceed 50% of the group’s total debt.

Collateral—To the extent available, the program requires borrowers to provide customary collateral to the fronting bank. 

  • KfW Syndicate Program

This program permits KfW to provide liquidity to companies for capital investments and working capital. The liquidity will be provided through KfW being a member of the financing syndicate, through risk sub-participation of KfW or a bilateral refinancing of the syndicate banks by KfW. The program will remain available until December 31, 2020.

Under the Syndicate Program, KfW will be matching the terms offered by commercial banks, including repayment profile, maturity, fees, margin and collateral; provided that these are consistent with KfW’s credit assessment. KfW can provide/risk sub-participate debt with a term of up to six years.

The eligibility criteria are the same as for the above programs.

KfW’s participation cannot be less than EUR 25 million, capped at the Funding Caps listed above.

In addition to this, KfW has indicated that it is willing to tailor the financing structures to the individual needs of a borrower. 

Considerations for Infrastructure Businesses Seeking to Utilize the Support

Infrastructure businesses seeking to utilize the support should consider the following:

  • Given that a combination of sureties, guarantees and indemnified loans based on the “Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak” cannot be used for the same funding needs, one may want to wait until the details of guarantee support that will be administered through SoFFin become available in order to assess which support scheme may be best for the business.
  • KfW generally expects to take benefit of available and customary security where it directly provides lending or takes risk participation. Companies should consider whether the relevant business’ capital structure is set up for KfW to share in security and guarantees. In the case of direct lending, this may be achieved relatively easily by those borrowers who have platform or multi-creditor financing structures but will require a more wholesale adaptation of intercreditor arrangements for those that do not. KfW generally requests the fronting bank to assign its repayment claims and its related security position to KfW.
  • Where liabilities are guaranteed through WSF, the guaranteed instruments are expected to be subject to restrictions such as no early termination, no enforcement action or set-off and no participation in potential insolvency proceedings. The existing intercreditor arrangements are likely to require adjustments to accommodate this.
  • The debt documentation of many German infrastructure businesses will include parameters on raising additional indebtedness including in relation to leverage levels and the maturity profile of new indebtedness. One would need to consider whether these parameters accommodate the support that is being sought or any waivers may be needed under the existing debt documents.
  • KfW programs do not operate as revolving facilities and, as such, for them to meet working capital needs, these may need to be oversized. As the interest is fixed, there will be prepayment penalties on early prepayment of facilities covered or provided directly by KfW through these programs; thus the maturity of the selected KfW-backed loan should be carefully chosen. 

The Process

Borrowers wishing to access any of the above KfW schemes should:

  • engage a financial institution of their choice as a fronting bank (it may be beneficial for this to be its relationship bank or, in the case of a syndicated program, one of the syndicate banks); and
  • complete an application form, which will then be reviewed and shared by the fronting/syndicate bank with KfW. 

KfW will conduct its usual risk and credit assessment for financings in excess of EUR 10 million and a modified, limited assessment for financings from EUR 3 to 10 million. Once KfW has approved the transaction, the fronting bank(s) or, KfW itself, in case of a syndicate lending, will advance the funds. KfW in turn will assume up to 80% of the risk on any indebtedness of a fronting bank(s).

We are very happy to discuss this process with German infrastructure businesses who are considering utilizing the KfW facilities and can assist with the required documentation. 

We will continue to monitor the issues raised in this article and provide updates when available.