The Government has proposed to grant NOK 50 million for investments in bonds issued by Norwegian companies.

The Norwegian Government's proposal for new schemes to strengthen companies' liquidity

| Insight

On Friday, 20 March 2020, the Norwegian Government presented to the Parliament its proposal for new schemes to strengthen companies' liquidity.

Guarantee scheme to small and medium sized companies

General

  • The Government has proposed to grant NOK 50 billion to a loan guarantee scheme pursuant to which the Norwegian state will issue guarantees in favour of financial institutions as security for their new loans to small and medium sized companies.
  • The scheme will be managed by the financial institutions through ordinary financing processes and shall, as far as possible, be on equal terms as a similar loan to a similar borrower would have been granted in normal market situation.
  • The state will guarantee up to 90% of the loan amount and any losses shall be shared pro rata between the state (90%) and the financial institution (10%).
  • All financial institution authorised to offer financial services in Norway may participate in the guarantee scheme. The total amount available under the guarantee scheme will be shared between the institutions based on their market share in the SMB market (excluding however financing of commercial real estate) at the end of 2019.
  • The scheme is only available for loans granted after the scheme has come into force and will be available until 1 June 2020.

Eligible companies under the new scheme

  • Only companies that in a normal market situation would be expected to be profitable are eligible under the new scheme. Companies with financial difficulties on 31 December 2019 will not be eligible.
  • Not more than 250 employees.
  • Annual turnover of less than 50 million euro or balance sheet total of no more than 43 million euro.
  • It is expected that the terms and condition will be further clarified by new regulation.

Which loan can be granted?

  • New loans in a total amount of NOK 50 million per company and with a duration of no more than 3 years.
  • The total loan to a company cannot amount to more than:
    • twice its wage costs for 2019 (including social taxes and costs relating to contracted workers), and
    • 25% of its annual turnover for 2019,
    • or a higher amount to companies with evidently particular need for liquidity over the next 18 months.

Effectiveness:

  • The proposal was presented first time to the Parliament on 21 March 2020 and will be up for the second constitutional hearing on the 24 March 2020.
  • The scheme constitutes government subsidy and will be prepared in accordance with the EU’s rules on state aid and be subject to approval from EFTA’s supervisory body ESA.
  • It is expected that ESA’s approval will be received shortly and that regulations and/or guidelines will be prepared to clarify the scheme further.

Investments in bonds in favour of larger sized companies

The Government has proposed to grant NOK 50 million for investments in bonds issued by Norwegian companies.

  • The initiative is directed towards larger Norwegian companies which usually would be able to obtain financing in the bond market.
  • The proposal includes a re-establishment of the Norwegian Governmental Bond Fund which shall be managed by Folketrygdfondet. The investments by the Norwegian Governmental Bond Fund shall be on market terms and be made with other co-investors.
  • Folketrygdfondet shall within its mandate from the Norwegian Ministry of Finance decide under which bonds loans it shall invest. The mandate will likely be determined this week and is expect to include inter alia:
    • Investments both in the bank/financial sector and in non-financial companies. A substantial part of the investments to be made in the high yield market.
    • Limitations on investments in bonds issued by one single issuer.
    • Credit rating requirements.

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