Technische ordered to repay state aid

The European Commission has ordered the German glass maker Technische Glaswerke Ilmenau GmbH (TGI) to repay a EUR 1 million loan which was not granted in line with EU state aid rules. The firm also ha…

The European Commission has ordered the German glass maker Technische Glaswerke Ilmenau GmbH (TGI) to repay a EUR 1 million loan which was not granted in line with EU state aid rules. The firm also has to return securities exchanged with a local bank. TGI, active in the field of special glass, was set up in 1994 with the aim of buying four of the twelve production lines of the former Ilmenauer Glaswerke GmbH for EUR 2,991,000. It had had cash-flow problems since it was set up and was faced with serious difficulties at the end of 1997. In light of these problems, action was taken to restore the viability of the company. The German Federal Trust Agency Bundesanstalt fuer vereinigungsbedingte Sonderaufgaben (BvS) reduced the purchase price by EUR 2,045,000 to just EUR 0.92 million while a bank guarantee for the remaining purchase price was converted into a low-rank mortgage. Furthermore, the State of Thueringia“s Aufbaubank provided a loan of just over EUR one million. After careful investigation, the Commission concluded that the reduction in purchase price constituted state aid, and that the loan was not covered by the aid scheme under which it had allegedly been granted. It also found that the exchange of securities constituted state aid as it gave the company an advantage that no private creditor would have given. The Commission found that the two measures could not be exempted as ad hoc aid for restructuring, especially as the firm“s restructuring plan was not based on “realistic assumptions” and there were doubts about the long-term viability of the company. Furthermore, the Commission considered that the aid was not “proportional” because no private investor was making a significant contribution to the restructuring.