2000/21/EC: Commission Decision of 28 July 1999 on state aid granted by the Federal Republic of Germany to Brockhausen Holze GmbH (notified under document number C(1999) 2914) (Text with EEA relevance) (Only the German text is authentic)
Date: 1999-07-28
Institutions: European Commission
Subjects: Germany, State aid, aid for restructuring, aid to undertakings, control of State aid, regional aid

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 28 July 1999

on state aid granted by the Federal Republic of Germany to Brockhausen Holze GmbH

(notified under document number C(1999) 2914)

(Only the German text is authentic)

(Text with EEA relevance)

(2000/21/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

1. PROCEDURE

(1)

By a complaint dated 2 September 1996 (registered as
received on 6 September 1996), the Commission was
informed that the Land of Saxony had granted state aid
to Brockhausen Holze GmbH (BHC), Chemnitz.
In
response to Commission requests for information dated
the
16 September 1996 and 22 November 1997,
German authorities sent formal replies on 15 October
1996 and 7 February 1997. On the basis of the informa-
tion contained in the last of those letters, the aid was

(1) OJ C 144, 9.5.1998, p. 15.

(2)

(3)

insolvency procedure for

registered as non-notified aid on 8 April 1997. On 18
April 1997 BHC filed for insolvency (Gesamtvollstreckung:
special
firms in the new
Länder). In letters dated 21 April, 12 June and 18 July
1997 the Commission asked the German authorities to
notify the aid. In letters dated 26 June and l5 August
1997, the German authorities refused on the ground
that notification no longer served any purpose because
the firm had filed for insolvency.

By letter dated 18 February 1998,
the Commission
informed Germany of its decision to initiate the proce-
dure laid down in Article 88(2) of the EC Treaty. In
addition, it formally requested Germany (2) to provide it,
within one month of receiving the request, with all
necessary documentation and information for assessing
the compatibility of the aid already granted with Article
87 of the EC Treaty. Germany replied by letter dated 4
May.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (3). In its decision, the Commission invited all inter-
ested parties to submit their comments on the aid. On 9
June 1998 the Commission received a set of comments
which it forwarded to the German authorities on 25
January 1999. After the deadline had been extended
several times, Germany was given the opportunity to
comment by 31 March 1999. It did not comply with
this deadline. After
from the
Commission, Germany finally submitted its comments
on 11 May 1999.

receiving a reminder

(2) In accordance with the judgment of the European Court of Justice
given on 13 April 1994 in Joined Cases C-324/90 and C-342/90
Federal Republic of Germany and Pleuger-Worthington V Commission
[1994] ECR I-1173.

(3) See footnote 1.

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2. DETAILED DESCRIPTION OF THE AID

2.1 Grounds for initiating the procedure

(4)

(5)

The aid to BHC came to the Commission's attention
through a complaint lodged by an Austrian engineering
works which alleged that
the Land of Saxony had
granted the firm aid amounting to DEM 4,7 million. In
the complainant's opinion, the aid enabled the firm to
increase its exports by reducing prices.

By letter dated 15 October 1996, Germany confirmed
that the firm had received a dormant equity holding of
DEM 2,5 million from the Saxony Consolidation Fund
(Konsolidierungsfonds) (4) and an 80 % deficiency guar-
antee (Ausfallbürgschaft) on a DEM 2,3 million loan
provided under Saxony's Guarantee Directive (5).

(6)

These aid measures presented the following difficulties.

(a) Aid scheme N 117/95 was approved on the basis of
the undertaking given by Germany that there would
be no combination of aid. However, the aid from the
Consolidation Fund was granted in addition to the
guarantee provided under scheme N 73/93, thereby
infringing the prohibition on combining aid. The aid
should therefore have been notified as ad hoc restruc-
turing aid.

restrict the amount of aid to an absolute minimum
and to comply more fully with the guidelines on
state aid for rescuing and restructuring firms in diffi-
culty (6).

(8)

In order to secure a formal notification and to be able to
assess the compatibility of the aid granted to the firm
with the common market, the Commission decided to
initiate the Article 88(2) procedure.

2.2 The recipient firm

(9)

As at 31 December 1995 BHC had 243 employees and
an annual turnover of DEM 32 million; no one firm
falling outside the definition of a small or medium-sized
enterprise (SME) owned 25 % or more of its capital. BHC
was therefore an SME within the meaning of Commis-
sion Recommendation 96/280/EC of 3 April 1996
concerning the definition of small and medium-sized
enterprises (7).

(10)

BHC traded in the three areas of make-to-order casting
(25 %), services (25 %) and replacement parts (50 %),
producing mainly steel balls for the cement industry and
linings for furnaces.

(b) Scheme N 73/93 allows guarantees to be provided

(11)

to cover loans of DEM 5 million or more only.

The firm is located in Chemnitz and thus in a structu-
rally weak area of Saxony.

(7)

Germany was again asked to notify the aid formally and
to provide all the necessary information for an assess-
ment of its compatibility with the common market. The
German authorities refused to do so in letters dated 26
June and 15 August 1997 on the grounds that:

2.3 History of the firm

(a) notification no longer served any purpose since the

firm had filed for insolvency, and

(12)

(b) the aid measures were not to be seen as separate
measures but as a single restructuring aid measure,
with the result that there was no infringement of the
prohibition on combining aid. Using both schemes
had made it possible to reduce the overall intensity
of the aid because a guarantee has a lesser aid inten-
sity than a loan. In this way it had been possible to

(4) Directive on grants from the Saxony Consolidation Fund for the
restructuring of small and medium-sized industrial enterprises under
the agreement between the Land of Saxony and the Treuhandanstalt
(THA)/Bundesanstalt für vereinigungsbedingte Sonderaufgaben (BvS) of 5
December 1994; state aid scheme N 117/95; Commission approval
given by letter dated 5 May 1995 (SG(95) D/5782).

(5) Directive on guarantees for industry and the liberal professions and
for agriculture and forestry of 1 September 1993; state aid scheme
N 73/93; Commission approval given by letter dated 7 June 1993
(SG(93) D/9273).

BHC succeeded Eisen- and Stahlgießerei Chemnitz
GmbH (ESC GmbH), which was acquired at the begin-
ning of 1992 from the Treuhandanstalt by PE GmbH. The
privatisation was conducted according to an open,
unconditional and transparent tendering procedure with
the highest bidder acquiring the firm.
In September
1992 the two firms created CPC GmbH, which was to
operate an iron and steel foundry. In 1993 the Land of
North Rhine-Westphalia produced a financing plan for
CPC GmbH which had as a condition the establishment
of a plant in North Rhine Westphalia. The CP Gießerei
KG (CPG KG) was therefore set up in Beckum. Subse-
quently, CPC GmbH and CPG KG were renamed BHC
Brockhausen & Holze Gießerei GmbH & Co KG (BHC
KG) and Brockhausen & Holze Gießerei GmbH (BHC
GmbH). On 29 August 1995 BHC GmbH and BHC KG
were merged to become BHC.

(6) OJ C 368, 23.12.1994, p. 12.
(7) OJ L 107, 30.4.1996, p. 4.

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(13) During 1995 BHC faced enormous liquidity problems
owing to delays in investment and to heavy start-up
losses. These start-up losses were principally due to the
firm's unproductive old equipment and to the end of
cooperation with a west German partner. In a report by
the management consultancy firm LOGOS-Consult, the
firm's financing requirements in January 1996 were put
at DEM 6 million. A restructuring plan was drawn up
and various public bodies provided financial assistance.
However, this did not resolve the firm's liquidity prob-
lems. In February 1997 further assistance of the order of
DEM 1,243 million was provided. Since this was not
sufficient, BHC filed for insolvency (Gesamtvollstreckung)
on 18 April 1997.

(14)

Insolvency proceedings began on 20 May 1997. The
sequestrator/administrator concluded a takeover and
lease agreement with Guß and Verschleißtechnik GmbH
(GVT). On 23 June BHC's business activities were
discontinued and taken over by GVT. The present
decision concerns the old firm only.

2.4 Financial assistance

(15) According to the notification which Germany submitted
on 4 May 1998 after the state aid procedure had been
initiated, BHC benefited between 1994 and 1997 from
various aid measures amounting to over DEM 42
million. The private investor's share in the restructuring
some
have
would
DEM 750 000 (8). However, the information supplied to
the Commission is not explicit regarding this share.

amounted

appear

to

to

(16)

In 1993 the first comprehensive financing plan for BHC
was drawn up.

(a) On 27 May 1994 the Land of North Rhine-West-
phalia, under its programme of guarantee assistance
for projects in Brandenburg, Mecklenburg-Western
Pomerania, Saxony, Saxony-Anhalt, Thuringia and
Berlin/East, provided a 90 % deficiency guarantee on
a DEM 20 million investment loan and a DEM 10
million operating loan (9). The aid thus came to
DEM 27 million.

(b) On 28 October 1994, under

the joint Federal
Government/Länder scheme for improving regional
Saxony
economic

structures (10),

Land of

the

(8) This would appear to have consisted of the following: 20 % of the
i.e. DEM 500 000, and DEM 250 000 in

DEM 2,3 million loan,
the form of a shareholder loan.

(9) N 155/88.
(10) 22nd framework plan of

the joint Federal Government/Länder

scheme for improving regional economic structures.

approved a grant of DEM 7,406 million, of which
only DEM 6,94 million was paid out.

(c) Under the 1993 Investment Allowance Act (Investi-
tionszulagengesetz/InvZulG), the Chemnitz tax office
provided the
allowances
amounting to DEM 91 268 and DEM 1 056 153
for the years 1994 and 1995.

firm with investment

(17)

In January 1996 restructuring measures had to be taken
in view of the difficulties faced by the firm. These were
financed by:

(a) an operating loan from the bank affiliated to the
firm (initially limited to DEM 1,8 million) that was
secured on 3 April 1996 by an 80 % guarantee
under Saxony's guarantee scheme (N 73/93). The
guarantee amounted to DEM 1,44 million;

(b) a dormant equity holding of DEM 2,5 million from
the Saxony Consolidation Fund (11) granted on 24
June 1996;

(c) a repayment deferral of DEM 1,167 million granted

by Chemnitz's Department of Public Works.

(18)

Lastly, in order to meet the firm's liquidity requirements,
three further measures were taken in February 1997.

(a) The guarantee provided by the Land of Saxony was
increased to cover a further DEM 500 000, bringing
the loan to DEM 2,3 million, with the guarantee
covering DEM 1,8 million.

(b) The BvS granted a loan of DEM 500 000, with
interest at 3 percentage points over the discount
rate.

(c) The shareholders helped to bridge the liquidity gap

with DEM 250 000.

(19) All the aid measures were registered as claims in the

insolvency proceedings.

2.5 Restructuring plan

(20)

The notification made on 4 May 1998 contained a brief
description of the restructuring plan. By letter dated 11
May 1999, Germany sent the Commission the report by
LOGOS-Consult, in which an assessment was made of
the plan drawn up by BHC's management.

(11) See footnote 4.

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(21)

The 1996 restructuring plan was designed to increase
BHC's productivity, to make it more competitive and to
improve the relatively tight financial situation.

(22)

It essentially comprised six measures:

(a) completing the reconstruction of essential plant with
a view to improving the quality of production,
cutting back on the use of material, energy and
human resources, and ultimately producing at more
competitive costs;

(b) shutting down unprofitable old equipment;

(c) reducing the workforce by 30;

(d) intensifying marketing activities by, among other
things, setting up a network of sales offices abroad,
sales
the management
volumes would expand in 1996 and in subsequent
years;

assumption being

that

(e) moving into a higher-quality product area, i.e. from
casting to cement. BHC was no longer to be a
foundry in the traditional sense.

(23) Under the financing plan, unnecessary land was to be
disposed of so that equity capital could be used to help
reduce the firm's indebtedness and thus open up possi-
bilities for additional financing from credit institutions.

(24)

Losses were still forecast for the financial year 1996, but
from 1997 onwards the firm was expected to move into
the black.

(25)

LOGOS-Consult considered the management's plan to
be optimistic and ambitious, but not unrealistic. Since it
was not based on the worst-case scenario,
some
elements of risk remained. For example, the firm's share
in the restructuring costs was to be financed from the
sale of unnecessary land. However, at the time of the
report by LOGOS-Consult, this sale had not yet taken
place and was still uncertain.

2.6 Products and markets

(26)

BHC's main activities were in the areas of casting,
replacement parts and services. As regards casting (25 %
of turnover), the firm principally produced parts for the
automotive
engineering industries,
where competitive pressures were enormous. Replace-

and mechanical

ment parts (50 % of turnover) were produced mainly for
the cement
industry. According to the notification,
however, there was no overcapacity here since the firm
occupied a customer-oriented product niche. Lastly,
services made up 25 % of turnover.

(27) With an annual output of some EUR 20 billion, the
Community is among the world's largest producers of
castings. The industry manufactures parts mostly for the
automative and mechanical engineering sectors and is
made up of small and medium-sized enterprises.

(28)

Foundries supply industrial firms and are thus dependent
to a large degree on cyclical business trends and on the
demand patterns of customers. Owing to the economic
downturn,
the number of people employed in the
foundry sector throughout the Community has fallen
since 1989 by 50 000, or some 20 % of the workforce.

(29)

By comparison with other sectors, foreign trade is virtu-
ally insignificant in the foundry products industry.

(30)

(31)

(32)

(33)

The sector cannot really be considered to be a growth
industry. Discounting the differences caused by fluctu-
ations in the business cycle, production has remained
almost constant over the last 10 years. The increase in
value over this period merely reflects the trend towards
higher-quality castings.

The most recent economic downturn in 1990 to 1993
hit the foundry sector hard. However, there was an
improvement in 1994 and the market did not suffer
from overcapacity. Since drastic manpower cuts have
been made in recent years and numerous manufacturing
processes are being increasingly rationalised, there is
now quiet optimism in the sector once again. Evidence
that
these rationalisation measures were what was
needed is found in the spectacular production volumes
achieved in 1995 with 20 % fewer employees than in
1989 (12).

3. COMMENTS FROM INTERESTED PARTIES

By letter dated 9 June 1998, the Commission received a
the engineering works
statement made on behalf of
Liezen and Gießerei GmbH, which had lodged the
complaint on 2 September 1996.

It welcomed the Commission's decision to initiate
proceedings against BHC and repeated the argument that
there had been overcapacity in the foundry sector for
several years. Public support for firms in this sector
distorted competition and should be avoided since it
enabled such firms to benefit from additional resources,
making it possible for them to sell their products at
below market price.

(12) See Panorama of EU Industry 1997, pages 10-41.

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(34)

Furthermore, the fact that insolvency proceedings had
been initiated in respect of BHC on 18 April 1996 could
the aid
not prevent an examination being made of
granted previously, which
distorted
competition.

already

had

(42)

The grant of DEM 7,406 million was made under the
joint Federal Government/Länder scheme for improving
regional economic structures, which had been notified
to and approved by the Commission.

(35) According to the statement, the new firm founded by Mr
Schulze-Brockhausen in the wake of
the insolvency
proceedings had applied to the Land of Saxony for
further aid. If approved, public funding of the rescue
arrangements (Auffanglösung), under which BHC's activi-
ties were to continue under the same management,
would result in circumvention of the relevant state aid
rules and further undue distortion of competition.

(43)

The investment allowance of DEM 1,147 million was
provided under schemes notified to and approved by the
Commission.

(36)

The statement went on to say that, if the previous and
the new aid turned out to be restructuring aid, the
question would arise as to whether the conditions set
out in the guidelines were met. If the new firm received
aid, this would run counter to the principle according to
which restructuring aid can be granted only once.

(44)

4. COMMENTS FROM GERMANY

(37) Germany responded to the Commission's request by
letter dated 4 May 1998, which, in practice, constitutes
notification of all the aid granted to BHC.

(38) As regards the question of whether aid was granted to
the new firm set up under the rescue arrangements, the
German authorities informed the Commission in a letter
dated 4 December 1998 that BHG Guß- and Ver-
schleißtechnik GmbH and GVT Guß-
and Ver-
schleißtechnik GmbH Chemnitz had applied for regional
aid totalling DEM 2,149 million under the joint Federal
Government/Länder
improving regional
economic structures.

scheme

for

(39) Germany confirmed this information in a letter dated 11
May 1999 and again explained why it considered the aid
granted to BHC to be compatible with the guidelines.

(45)

5. ASSESSMENT OF THE AID

(40)

(41)

5.1 Aid within the meaning of Article 87(1) of the

EC Treaty

The possibility that the aid described distorted trade
between Member States on the market referred to at the
outset cannot be ruled out. For this reason, each aid
measure must be assessed in the light of Article 87(1) of
the EC Treaty.

The 90 % deficiency guarantee on an investment loan of
DEM 20 million and an operating loan of DEM 10
million, i.e. a guarantee worth DEM 27 million in total,
was provided under a notified scheme already approved
by the Commission. The criteria laid down for imple-
menting the scheme were adhered to.

this

The 80 % guarantee on an operating loan of DEM 2,3
million,
i.e. a guarantee worth DEM 1,8 million, was
provided under the guarantee scheme of the Land of
Saxony (N 73/93). Generally speaking,
scheme
permits guarantees to be provided only for loans of
DEM 5 million or more. In exceptional circumstances,
however, the Sächsische Aufbaubank (Saxony Bank for
Reconstruction) or the Bürgschaftsbank Sachsen GmbH
(Saxony Guarantee Bank) can guarantee loans of under
DEM 5 million if, for example, the loan is to be used to
finance restructuring projects and the guarantee is thus
designed to contribute to the success of the restructuring
plan. This scheme was approved on condition that a
restructuring plan for restoring the viability of the firm
the
was drawn up.
Commission would have to examine whether it could
restore the viability of the firm.

If such a plan were drawn up,

The dormant equity holding of DEM 2,5 million came
from the Saxony Consolidation Fund (N 117/95). This
scheme was approved,
inter alia on condition that no
firm should receive aid if it had already received restruc-
turing aid for firms in difficulty. This prohibition on
combining aid was not adhered to, since the aid was
granted in addition to the 80 % guarantee on a loan of
DEM 2,3 million from the Sächsische Aufbaubank. The
German authorities argued that there was no combina-
tion of aid in this case since the two measures were not
to be seen as separate but as a single restructuring aid
measure. They explained that using two aid schemes had
enabled them to reduce the overall aid intensity since the
intensity for guarantees is lower than for loans. This
argument cannot be accepted. If the Commission were
to accept
it, prohibitions on combining aid would
become meaningless and compliance arbitrary. Further-
more, the aid intensity of a guarantee or loan provided
by the State to a firm in difficulty is considered to be
100 % and the aid is therefore equivalent to a grant (13).

(13) Commission communication to the Member States on the applica-
tion of Articles 92 and 93 of the EC Treaty and of Article 5 of
Commission Directive 80/723/EEC on the transparency of financial
relations between Member States and public undertakings (OJ L
307, 13.11.1993, p. 3).

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Since the conditions of the scheme were not met, the
measure should have been notified individually under
Article 88(3) of the EC Treaty. Germany did not fulfil
this obligation, with the result that the aid was granted
unlawfully and must be seen as ad hoc restructuring aid.

The repayment deferral of DEM 1,167 million granted
by the Chemnitz Department of Public Works also
constitutes state aid within the meaning of Article 87(1)
of the EC Treaty and should have been notified under
Article 88(3).
it is therefore
In purely formal terms,
unlawful. It secures additional liquidity and is therefore
equivalent to a loan.

The DEM 500 000 loan from the BvS was granted to a
firm in difficulty and is to be considered to constitute
aid within the meaning of Article 87(1) of the EC Treaty.
Since it was not notified,
it is also unlawful from a
formal point of view. This amount should be increased
by the interest on the loan of DEM 5 800.

(46)

(47)

5.2 Exemption under Article 87(3) of the EC Treaty

(48)

The Commission must examine whether the aid is
eligible for exemption under Article 87(3) of the EC
Treaty.

be compatible with the common market if the criteria
set out in the guidelines are met.

(50)

The 80 % guarantee from the Land of Saxony to cover
an operating loan of DEM 2,3 million, the dormant
equity holding from the Consolidation Fund, the repay-
ment deferral of DEM 1,167 million granted by the
Chemnitz Department of Public Works and the BvS loan
of DEM 500 000 can be considered to be restructuring
aid. The assistance measures provided in 1997 in view
of the renewed liquidity problems can be considered to
be additional measures necessary for the restructuring.

(51)

For the aid to be approved by the Commission, the
restructuring plan would have to meet all the following
criteria:

(a) the restructuring must restore the long-term viability

of the firm;

(b) undue distortions of competition must be avoided;

(c) the amount and intensity of the aid must be limited
to the strict minimum needed for the restructuring,
and the restructuring costs must not exceed the
anticipated benefits;

(d) the restructuring plan must be implemented in full,
set by the Commission

the conditions

and all
observed;

(e) the implementation of the restructuring plan must
be monitored on the basis of detailed annual reports.

(49)

In BHC's case,
the Commission based itself on the
special rule laid down in Article 87(3)(c) of the EC
Treaty with regard to ‘aid to facilitate the development
of certain economic activities or of certain economic
areas, where such aid does not adversely affect trading
conditions to an extent contrary to the common inter-
est’. The primary objective of the aid in question is not
the promotion of regional development, but the restruc-
turing of a firm in difficulty. Such aid can be judged to

(52)

The sine qua non of any restructuring plan is that it must
restore the long-term viability of
the firm within a
reasonable timescale and must be based on realistic
assumptions as to the firm's future operating conditions.

(53)

The restructuring plan assumed the following financial
development of the firm:

1995
outturn

1996
forecast

1997
forecast

1998
forecast

(DEM)

Sales revenues

18 394 000

30 779 000

34 550 000

37 600 000

Expenditure on raw materials,
auxiliary materials and oper-
ating supplies

10 384 000

9 833 000

10 450 000

11 400 000

Manpower costs

6 689 000

7 900 000

8 327 000

8 327 000

Depreciation

361 000

2 405 000

2 800 000

2 800 000

Annual profit (loss)

—

– 1 546 000

247 000

2 163 000

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(54)

In the Commission's view, the restructuring plan is not
based on realistic assumptions. Specifically, it assumes
an increase in sales from 1996 and a corresponding
significant increase in turnover; it also predicts the finan-
cial recovery of the firm following the sale of unneces-
sary land. This increase in turnover depends basically on
the firm's productive capacity in the cement market
segment, into which it wishes to move. The plan thus
predicts an increase in turnover of more than 60 %
between 1995 and 1996. In the Commission's view, the
increases in turnover were overestimated in the plan. It
is unlikely that BHC could have redirected its activities
towards a new market so quickly. This requires the
acquisition of specialist expertise and the technical adap-
tation of machinery. Furthermore, the financial recovery
of BHC, which was in an extremely tight financial situa-
tion, depends on the sale of unnecessary land for a price
of at least DEM 5 million. However, in the new Länder
there is an oversupply of industrial land. The minimum
price set by BHC's management has to be seen as uncer-
tain. In the report by LOGOS-Consult it was classed as
risky since in the short
term only between DEM 3
million and DEM 4 million could be raised. Under the
circumstances, the Commission considers that the viabi-
lity of the firm could not be restored within a reasonable
timescale.

restructuring plan was not based on realistic assump-
tions and could not restore the firm's viability. Since the
first condition laid down in the guidelines is not met,
the aid cannot be considered to be compatible with the
common market.

(58)

The effect of the aid on competition on the market for
foundry products must also be examined. According to
the information in the Commission's possession, there is
no overcapacity in this industry. Since BHC is an SME
located in an area covered by Article 87(2)(a) of the EC
Treaty and since there is no overcapacity in the sector,
the Commission takes the view that competitors were
not adversely affected by the restructuring.

(59)

Since one of the conditions set out in the guidelines has
not been met, the restructuring aid to BHC cannot be
approved and so it is not necessary to assess the firm's
own share in the restructuring costs.

(55)

The subsequent development of the firm bears out this
assessment. At the end of 1996 BHC again faced enor-
mous liquidity problems, with turnover remaining below
expected levels. It recorded losses of more than DEM 7
million that year (14).

6. CONCLUSION

(56)

There are several reasons for this:

(a) the land could not be sold;

(b) a number of claims could not be recovered;

(60) Germany did not meet the conditions for the application
of the Saxony Guarantee Directive (N 73/93) because
the restructuring plan could not restore the viability of
the firm. The aid must therefore be viewed as ad hoc
restructuring aid. The criteria laid down in the guidelines
are not met. The 80 % guarantee covering DEM 1,8
million of the operating loan of DEM 2,3 million is
therefore not compatible with the common market.

(c) the firm faced major

technical problems which
prevented it from achieving its planned turnover.

(61)

(57) Despite renewed financial assistance in February 1997,
BHC's viability was not restored; between January and
April the firm recorded losses of more than DEM 5
million (15). On 18 April 1997 it filed for insolvency. All
of this confirms the Commission's assessment that the

(14) The BHC balance sheet and profit and loss account for 1996 are

not available.

(15) This figure comes from the list of assets and liabilities drawn up
by the sequestrator on 18 April 1997. The accounts for 1997 are
incomplete.

The conditions for the application of scheme N 117/95
(compliance with the prohibition on combining aid)
were not met. The DEM 2,5 million dormant equity
holding from the Consolidation Fund was therefore
classed by the Commission as ad hoc restructuring aid.
Since the criteria set out in the guidelines were not met,
it is therefore not compatible with the common market.

(62)

The repayment deferral of DEM 1,167 million allowed
by the Chemnitz Public Works Department constitutes
restructuring aid. Since, here too, the criteria set out
in the guidelines were not met, this measure is also
incompatible with the common market.

12. 1. 2000

EN

Official Journal of the European Communities

L 7/13

(63)

(64)

The BvS loan of DEM 500 000 is not compatible with
the criteria for the granting of restructuring aid and
cannot be approved either on the basis of the exemp-
tions provided for in the guidelines.

The Commission finds that Germany granted the above
aid in breach of Article 88(3) of the EC Treaty. The
guarantee of DEM 1,8 million from the Land of Saxony,
the dormant equity holding of DEM 2,5 million from
the Consolidation Fund,
the repayment deferral of
DEM 1,167 million and the DEM 500 000 loan from
the BvS, together with interest of DEM 5 800, are to be
recovered by Germany in accordance with its relevant
legislation and procedures,

HAS ADOPTED THIS DECISION:

Article 1

The state aid which Germany has granted to Brockhausen
Holze GmbH, Chemnitz, amounting to DEM 5,9728 million,
is incompatible with the common market.

The aid consists of the following:

(d) a repayment deferral of DEM 1,167 million.

Article 2

1.
Germany shall take all necessary measures to recover
from the recipient the aid referred to in Article 1 and unlaw-
fully made available to the recipient.

2.
Recovery shall be effected in accordance with the provi-
sions and procedures of German law. The aid to be recovered
shall include interest from the date on which the unlawful aid
was made available to the recipient until
its
recovery. Interest shall be calculated on the basis of the refer-
ence rate used for calculating the grant equivalent of regional
aid.

the date of

Article 3

Germany shall inform the Commission, within two months of
notification of this Decision, of the measures taken to comply
with it.

This Decision is addressed to the Federal Republic of Germany.

Article 4

(a) a DEM 1,8 million guarantee from the Land of Saxony,

Done at Brussels, 28 July 1999.

(b) a dormant equity holding of DEM 2,5 million from the

Saxony Consolidation Fund,

(c) a loan of DEM 500 000,

together with interest of

DEM 5 800, and

For the Commission

Karel VAN MIERT

Member of the Commission