The aid planned by Andalusia consisted of an 80 % guarantee for a 10-year loan of EUR 4 375 000 with an interest-rate subsidy of 0,89 %, and a government loan of EUR 2 000 000 over 10 years, granted by the Andalusia Innovation and Development Agency (IDEA).

• debts of EUR 2,7 million to suppliers,

• debts of EUR 650 000 to the government,

• debts of EUR 1,6 million to other undertakings of the A NOVO Group,

• other needs deriving from the expansion of activities.

All this amounted to cash needs of some EUR 5 million.

Apart from the abovementioned injection of fresh capital, the restructuring plan did not provide for any restructuring of the company’s activities, organisation and management, nor its workforce. As regards the company’s structure, the plan only described the current areas of activity and the possibilities and prospects for their expansion.

The plan did not refer to any contribution by the beneficiary or its parent company. As regards compensatory measures, the plan did not provide for any capacity reduction or asset sales. As regards prospects, no distinction was made between best-case, intermediate and worst-case assumptions.

During the assessment of the restructuring plan, it emerged that rescue aid had been granted to A NOVO in May 2009 in the form of an 80 % guarantee on a EUR 1 825 000 loan for six months, with an annual premium of 1,5 % and an interest rate of 2,86 %. Spain did not notify this guarantee.

After the rescue aid was awarded on 21 May 2009, A NOVO submitted a restructuring plan to the Andalusian authorities on 10 September 2009.

A NOVO is a large company that operates in the area of after-sales activities for computers, mobile telephones and other electronic devices. It is a wholly owned subsidiary of the French company A NOVO SA. Originally, A NOVO produced telephones. Between 2004 and 2006 A NOVO gave up production activities and concentrated on after-sales services. A NOVO is located in Malaga (Andalusia), in an area eligible for regional aid under the exemption in Article 107(3)(a) TFEU.

A NOVO also had high losses and a decreasing turnover:

Restructuring of A NOVO had already begun in July 2005 with a view to switching activities from telephone production to after-sales services. The 2005 Agreement on the Bases and Commitments of A NOVO Comlink SL’s Viability Plan required the company to contribute to financing its Viability Plan by means of a sale and lease-back operation covering its real estate at the Andalusia Technology Park (for an estimated sum of EUR 14,9 million), to transform 94 temporary contracts into permanent contracts before 31 December 2007, to conclude 88 new contracts before 31 December 2009, and to keep on the current workforce until 2015. The Agreement also included a partial retirement scheme for employees once they reached the age of 60.

In return, the Department of Employment of the Junta de Andalucía authorised A NOVO to suspend 224 employment contracts for employees aged over 54 until 31 August 2008. This authorisation gives these employees the right to apply for unemployment benefits although, in theory, they are still employed. During the temporary suspension of employment contracts, employees continue to form part of the company. The measure is intended to supplement the income of the employees concerned until they reach retirement age.

The company’s legal obligations are limited to paying the employer’s contribution to the social security system for the suspended employees, and payroll and social security costs during the period of partial retirement (between the ages of 60 and 65).

Following an analysis of these State aid measures under Article 107(3)(c) TFEU and in the light of the Guidelines, the Commission decided to initiate the procedure under Article 108(2) TFEU because it had doubts whether the conditions for approving the rescue and restructuring aid had been met.

The Commission concluded that both measures were likely to constitute aid. Under Article 107(1) TFEU, any financial support granted by a Member State which distorts or threatens to distort competition by favouring certain undertakings and which affects trade between Member States constitutes aid. The measures in question, i.e. the guarantees, the interest-rate subsidy, the loan by the region of Andalusia, and the direct payments to employees of A NOVO involve state resources. They were granted by the Autonomous Community of Andalusia and are imputable to the State.

Although A NOVO was in economic difficulties in early 2009, there were doubts whether it was eligible for any rescue or restructuring aid, as it is a wholly owned subsidiary of the French undertaking A NOVO SA, which had a turnover of some EUR 350 million and a net profit of EUR 12 million in 2009. According to point 11 of the Guidelines, a firm in difficulty is only eligible where it cannot recover with the funds it obtains from its owners. Furthermore, under point 13 of the Guidelines, in the case of a firm belonging to a larger business group, the Member State must demonstrate that the firm’s difficulties are intrinsic and too serious to be dealt with by the group itself. Spain has not submitted information showing whether these conditions are met.

Regarding the restructuring plan, the Commission has doubts that it will lead to long-term viability, as required by points 35 and 36 of the Guidelines. The restructuring plan did not contain a description of internal measures to improve the firm’s viability and structure. The plan also lacked compensatory measures to mitigate as far as possible any adverse effects of the aid on competitors, such as a reduction in capacity (points 38 and 39 of the Guidelines). Nor was it possible to ascertain that the amount and intensity of the aid were limited to the strict minimum of the restructuring costs necessary (points 43 and 45 of the Guidelines). Specifically, the plan lacked any reference to a contribution from the recipient.

Therefore, it was doubtful that the rescue and restructuring aid could be considered compatible with the relevant Guidelines.

After the withdrawal of the notification, the procedure regarding the notified restructuring plan ceased to serve any purpose. However, the withdrawal of a notification cannot have an effect on the rescue aid which was not notified and already granted before the notification of the restructuring aid.

Following the replies by the Spanish authorities, it must be ensured that the rescue aid is compatible with Article 107(3)(c), as it meets the relevant conditions laid down in the Community Guidelines on State aid for rescuing and restructuring firms in difficulty.

The measure constitutes aid within the meaning of Article 107(1) TFEU. To qualify as State aid, the measure needs to confer an advantage on the recipient which it could not obtain under normal market conditions and which would affect competition and trade between Member States. A guarantee must be considered to constitute aid if the borrower is in financial difficulty under the terms of point 3.2(a) of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees. In this case, the Commission considers that the guarantee confers an advantage on the borrower. The position of the beneficiary company was strengthened compared with that of its competitors. Hence the measure could distort competition.

A NOVO is a firm in difficulty within the meaning of point 13 of the Guidelines, despite belonging to a larger group. Spain could demonstrate that the difficulties of the undertaking were intrinsic and not the result of an arbitrary allocation of costs. In fact, they were due to the industrial restructuring affecting the company in the preceding years. The difficulties were too serious to be dealt with by the parent company alone as this company itself was under financial strain at the time of the granting of the rescue aid. In 2006 it had invested EUR 2,123 million in A NOVO and it had itself also incurred losses in 2008. In 2009 it made an own cash injection of EUR 2,060 million.

The guarantee complies with the requirements laid down in point 25(a) of the Guidelines. The rescue bank loan of EUR 1,875 million, which was 80 % guaranteed by the Junta de Andalucía, was granted at an interest rate which is comparable to those observed for loans to healthy firms, according to the Communication on the revision of the method for setting the reference and discount rates. In addition, the borrower paid an annual guarantee premium of 1,5 %. The guarantee expired within six months after the date on which the loan was granted.

The guarantee was justified due to A NOVO’s serious social difficulties and had no unduly adverse spill-over effects in other Member States within the meaning of point 25(b) of the Guidelines. The Commission had already acknowledged in the opening Decision that the economic situation of A NOVO, which employed 527 people, became difficult during 2008 (see recitals 11 and 12 above). A bankruptcy or closure of the undertaking would have caused a very serious social situation in Andalusia, which already suffers from a high unemployment rate. In view of the regional focus of after-sales repair services, unduly adverse spill-over effects in other Member States are not likely.

The conditions of point 25(c) of the Guidelines applicable to non-notified rescue aid are also fulfilled, according to which the Member State must submit within six months after the first authorisation of a rescue aid measure a restructuring plan or proof that the guarantee has been terminated. Following the granting of the rescue aid on 21 May 2009, A NOVO submitted a restructuring plan on 10 September 2009 together with an application for restructuring aid. On 16 October 2009, Spain notified the restructuring plan. In addition, the state guarantee was limited to six months and expired on 21 November 2009.

In addition, the amount of aid was limited to the quantity needed to keep the undertaking in business during the authorisation period of six months, as required by point 25(d) of the Guidelines. The amount was calculated on the basis of the six-month liquidity needs and cash deficit submitted by the company, and was well below the ceiling established following the formula provided in the Annex to the Guidelines. It may be considered to be restricted to the amount needed according to point 25(d) of the Guidelines.

As regards the one time, last time principle, the information submitted by Spain allowed the Commission to verify that the public funds employed in the context of the 2005 restructuring for social measures for part of A NOVO’s workforce took place under a general social security scheme and cannot be regarded as State aid, in accordance with points 61 and 63 of the Guidelines.

Consequently, the information submitted by the Spanish authorities clears up any doubts about the compatibility of the interim relief awarded to A NOVO with Article 107(3)(c) of the Treaty, which the Commission had expressed in its decision to initiate the procedure laid down in Article 108(2) of the Treaty.