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KredEx to begin offering a comprehensive response to help companies facing difficulties due to the coronavirus

19.03.2020

The continuing spread of the coronavirus has resulted in serious disruptions to the economic activity of Estonian companies. In order to mitigate these effects, state-owned financial institution KredEx is planning additional measures aimed at assisting Estonian companies. Packages of measures will be developed based on the different possible courses that the crisis may take, with the first of these measures being ready to be implemented next week. More specific conditions are currently being developed, and will be published on an ongoing basis.

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COVID-19
COVID-19

The continuing spread of the coronavirus has resulted in serious disruptions to the economic activity of Estonian companies. In order to mitigate these effects, state-owned financial institution KredEx is planning additional measures aimed at assisting Estonian companies. Packages of measures will be developed based on the different possible courses that the crisis may take, with the first of these measures being ready to be implemented next week. More specific conditions are currently being developed, and will be published on an ongoing basis.

According to Lehar Kütt, CEO of KredEx, Estonian undertakings are currently in need of flexible financing solutions to cope with the growing uncertainty around the world. ‘The situation is putting a lot of pressure on the liquidity of companies and the lack of certainty regarding the duration of the pandemic only adds to the uncertainty. In order for undertakings to emerge from this crisis as soon as possible and having suffered only minimal losses, KredEx is ready to take on higher risks, via new and existing guarantee and loan measures, than before. Companies have different capital needs, and it is certainly worth contacting your home bank as soon as possible to find solutions, before problems escalate. Estonian commercial banks have promised undertakings that they will make concessions on loan repayment schedules as a result of the crisis’, Kütt said.

According to Kaimar Karu, Minister of Foreign Trade and Information Technology, KredEx's package of measures has three main objectives: to preserve the jobs within companies, to ensure the sustainability of business, and to support additional investments in product development and the expansion of production capacity. ‘The purpose of the comprehensive response is not to take over the services of commercial banks, but to help in situations where the services of banks are not available to companies to the necessary extent. It is very important to point out that asking for help is certainly not something to be ashamed of, but a sensible action in every way, particularly in light of the current situation. If a company needs financial assistance, then surely KredEx's options should be explored via its home bank. KredEx is an effective mechanism for supporting Estonian companies. You should contact your home bank as soon as it looks like a problem might arise, not when it might already be too late. The health of a company is essentially not much different from that of a person – it is better to check immediately, rather than postpone and find yourself in an unresolvable situation’, Karu said.

Steps for an undertaking to alleviate liquidity problems.

  • First, the undertaking should contact their home bank and ask for a relaxation of the repayment schedule for an existing loan or a new loan. Almost all banks have publicly expressed their willingness to allow grace periods for undertakings affected by the crisis.
  • If the bank sees an additional need for this, they will involve KredEx in order to implement comprehensive measures. There is no need to address KredEx directly, the implementation of the measures will be carried out jointly through the undertaking’s bank. KredEx cooperates closely with all of the major banks operating in Estonia, through which KredEx's support is easily able to reach undertakings.
  • If an exhaustive solution is not reached in the previous steps, the undertaking will also be able to apply for a loan from KredEx.

In the first package of measures, KredEx will begin offering the following new services to help alleviate the current situation:

  • Exceptional loan guarantee to relax the repayment schedules of existing bank loans and to issue new loans. If the bank relaxes the repayment schedule for an existing bank loan not backed by KredEx or is willing to issue a new loan to the undertaking, KredEx will give its guarantee to that loan.
  • Extraordinary loan. If banks are no longer financing undertakings, KredEx will, if necessary, provide the undertaking with an extraordinary working capital loan to overcome the liquidity problems caused by the coronavirus outbreak or an investment loan to take advantage of the new business opportunities created by the coronavirus outbreak as well as other new business opportunities.
  • Additional guarantee fund for the provision of loan guarantees. While the maximum guarantee amount for KredEx thus far was EUR 2-5 million, depending on the nature of the project, the maximum guarantee amount for all projects will now be raised to EUR 5 million.

To offer the first package of measures, the state will allocate EUR 1.5 billion to KredEx, which will allow KredEx to offer hedge measures and loans totalling up to EUR 3.5 billion, allowing companies to receive additional capital of up to EUR 4.5 billion to emerge from the crisis.

‘Finding solutions to today's critical concerns is one very important side of the package of measures. The other side of this is the realisation of new opportunities, i.e. investments, if a company's indicators support it and if new business opportunities for expansion or the creation of new services and products have arisen in the market’, Karu added.

All Estonian undertakings are the target group for services, except for activities and areas previously excluded by KredEx. Details about the measures can be found on the KredEx website www.kredex.ee/koroona. The information on the page will be updated on an ongoing basis and more specific conditions will appear at the latest at the beginning of next week, i.e. week 13. It shall also include current information on the implementation of the packages of measures, depending on the duration and extent of the pandemic.

In addition to new services, KredEx has relaxed the principles governing the issuing of existing services.

  • KredEx Krediidikindlustus, which provides protection for companies against payment difficulties related to the buyer, maintains risk assessments at pre-outbreak level, i.e. the potential negative impact of the coronavirus outbreak on credit decisions is not taken into account.
  • In the case of KredEx's other services (loan guarantee, industry loan, capital loan and start-up loan), KredEx is being more flexible than usual, taking into consideration the potential demands of banks and undertakings, which may arise due to the situation. Where necessary, all companies shall be granted a grace period or an extension of the term of the loan. The guarantee or loan shall continue to be issued to all projects for which there are reasonable grounds to believe that they will be viable when the situation returns to normal.

‘This crisis is surmountable, if we all work together. Undertakings, the public sector and banks are working to keep businesses running and thus to preserve as many jobs as possible. Surely such crises also create new opportunities for growth. We are prepared for the worst, but we believe that, with a joint effort, we can make the crisis a short-term one and reduce its negative impact on all of us’, Lehar Kütt added.

KredEx is a state-owned financial institution that makes capital available and hedges credit risks in order for Estonian companies to develop and to improve people's living condtitions.