The following presentation is based on input from numerous mrp hotels customers from the hotel industry who have applied for liquidity support.
This document has been prepared to the best of our knowledge and belief. There is no claim to completeness and correctness of the listed information.
The following presentation is based on input from numerous mrp hotels customers from the hotel industry who have applied for liquidity support. It is assumed that mrp customers and mrp itself have discovered that banks, funding agencies, etc. are working at full speed and to the best of their knowledge and belief on practicable, sustainable solutions for the industry in order to prevent the death of the companies and thus also of jobs. The following list is intended to highlight any areas that have not been taken into account and to encourage improvements.
The dilemma of the banks
- The bank assumes responsibility for checking the criteria of the Corporate Reorganization Act (URG) on behalf of the development institutions – this is done by the bank’s risk departments, which have to deal with the application burden.
- In some cases, the banks apply stricter criteria than those required by the development institutions (e.g. compliance with both URG criteria).
- On the one hand, continuation forecasts often go unnoticed, as there is not enough time at the moment to examine them in detail, especially as the future is uncertain. On the other hand, the promotional institutions and banks want to ensure that guarantees/loans can be repaid in three to five years.
- The banks fear:
- in the mass around their 20% liability share. Politicians report that 20% of the liability share is borne by the banks; in some cases attempts are being made to outsource this to the borrower.
- that disbursement will be approved which may not comply with the funding guidelines and may eventually be regressive from the liability side.
- companies with already existing debt obligations at the house bank have a clear advantage, as the bank already has a commitment. Customers with a simple current account, without bank financing, must, therefore, find an institution that will take over the risk.
- It can be assumed that the emergency fund will be paid out via a bank-independent vehicle so that the above-mentioned effects are minimized.
Problem URG guidelines
- Both OEHT and AWS point out that a farm falls under the URG if both criteria (8% equity ratio and more than 15 years notional debt repayment period) are met – i.e. meeting one of the criteria should be sufficient to obtain guarantees – this assessment is not shared by some banks.
- Despite the URG, the criteria are not sustainably defined. A company that meets the criteria in the 2018 balance sheet will receive corona funding. However, from today’s point of view, this statement of assets has nothing to do with the company’s condition.
- Companies in the start-up or initial phase may not yet fulfill the criteria by 2018 or 2019 – or the balance sheet from the year2019 has not yet been finalized. In addition, a rating is often requested from the banks, which includes the one-year probability of default of the company. New companies that were only founded in 2019 and have start-up losses on their balance sheet often cannot meet these criteria or do not have a corresponding rating.
- A rejection of the credit application is the consequence.
The problem of the capacities of banks or funding agencies
- Given a large number of applications, no institute can check the plausibility of continuation forecasts in this short time. The reason for this is that nobody is in a position to produce a reliable and appropriate forecast.
- At present, the release of the credit funds is based on the fulfillment of the key figures from the balance sheet of the year 2018.
The problem of the conveyor system – hoping for the right conveyor platform
- Creditworthiness bad, house bank does not grant loans, ÖHT subsidy was rejected, but the company is too small for hardship funds – what now? Enterprises which fall through the structural grid of the government aid (for whatever reasons), can currently (as of the end of March) do nothing.
- After the jurisdiction assumes at present with the insolvency registration of a 120 days period, it is to proceed within this period from a bare payment stop and insolvency cannot be made valid.
- The emergency fund (endowed with EUR 15 bn), which is currently being developed, will provide some clarity in this regard and secure liquidity – for healthy companies – on a sustainable basis.
The problem of debt capital
- All current support programs are based on deferrals, guarantees and loans. This means a further deterioration of the equity ratio and a deterioration of the general creditworthiness if the one subsidy is used.
- It will be difficult to repay deferred amounts after the re-opening of the company, as the business will start with a time lag, especially in the tourism and hotel industry.
The problem of the interest rate
- The interest rate for promotional loans is not uniformly fixed. In some cases, an interest rate of over 2.0% has already been announced – despite the fact that the funding agency has assumed 80% of the liability.
- It can be assumed that interest rates will be partially assumed at the level of the federal states or fall below 1.0%.
The problem of application processing/speed of disbursement
- As of the end of March, subsidies/liabilities were only gradually released. Only a small amount has been paid out so far. Thus, entrepreneurs who have registered their employees for short-time work are being penalized.
- The companies have to pay the full personnel costs and thus weaken the company’s liquidity in the long term. Repayment by the AMS (Labour Market Service) is still subject to a 90-day notice period.
The post-crisis company
Subsidized loans must also be repaid, but the business of the tourism and hotel industry is heavily dependent on exogenous factors such as the opening of borders, airlines or general travel sentiment.
Other countries have developed better variants here, for example, Switzerland:
- 100% assumption of liability by the Confederation up to 500,000 Swiss francs, interest rate 0.0
- 85% Assumption of liability by the Confederation up to CHF 20 million, interest rate 0.5