Bridging the COVID-19 Liquidity Gap: New Political Agreement regarding Danish State Guarantee Schemes 

July, 2020 -

On 15 June 2020, a political agreement was reached between the Danish Government and a number of Danish political parties regarding gradual phase-out of certain existing COVID-19 aid packages which are to be replaced with a comprehensive economic recovery package designed to boost the Danish economy following the outbreak of COVID-19.

Among other elements, the political agreement provides for two significant changes to the four Danish state guarantee schemes already established via Vækstfonden (the Danish State's investment fund) and EKF Denmark's Export Credit Agency. Subject to satisfaction of the applicable eligibility criteria, these schemes provide for state guarantees to be issued by Vækstfonden or EKF in respect of loans and credit facilities to large companies and SMEs, whose revenue has been severely affected by the COVID-19 outbreak.

The first change announced in the political agreement relates to an extension of the deadline regarding application for a state guarantee from currently 15 October 2020 until the end of 2020. It is noted that the parties agree to assess the requirements on a continuing basis.

The second change announced in the political agreement relates to an increase of the state guaranteed amount from currently 70% to 80% of the principal amount of the loan or credit facility.

It is noted in the political agreement that the state guarantee schemes have so far only been used to a limited extent. This may, among other things, be due to the ability to receive compensation by other means, including pursuant to the existing compensation packages. However, with the upcoming gradual phase-out of these compensation packages, it is the expectation that the use of the state guarantee schemes will increase.

The above political agreement is yet to be implemented.

Read the political agreement here and the related fact sheet here (both available in Danish only).

For further information about the existing state guarantee schemes established via Vækstfonden, please refer to our prior insight available here.


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