2003/876/EC: Commission decision of 19 February 2003 on the measures implemented by Spain for Hilados y Tejidos Puigneró SA (notified under document number C(2003) 518) (Text with EEA relevance)
Date: 2003-02-19
Institutions: European Commission
Subjects: Spain, State aid, control of State aid, textile industry

L 337/14

EN

Official Journal of the European Union

23.12.2003

COMMISSION DECISION

of 19 February 2003

on the measures implemented by Spain for Hilados y Tejidos Puigneró SA

(notified under document number C(2003) 518)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2003/876/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:

I. PROCEDURE

By letter dated 12 March 2001, the Commission, after
receiving a complaint from an interested party in the
textile sector, required the Spanish authorities to supply
information on alleged State
aid measures. The
Commission subsequently received a second complaint.

By letter dated 18 April 2001, Spain submitted
incomplete information in response to the questions
that the Commission had raised in its letter. By letter of
reminder
17 May 2001,
Spanish
requesting
authorities responded by letters of 14, 25 and 29 June
2001.

a
information. The

the Commission sent

the missing

(1)

(2)

(3)

to

its

the

decision

authorities
responded to the Commission's enquiry
concerning possible confidential information contained
in
procedure. The
initiate
Commission replied by letter dated 26 October 2001,
stating that it was not able to grant Spain's request. On
14 November 2001, a meeting was held between the
Commission departments and the Spanish authorities, at
their request, which was also attended by representatives
of the Catalan Institute of Finance (Instituto Catalán de
Finanzas, hereinafter ‘ICF'). By letter dated 14 December
2001, the Commission urged the Spanish authorities to
supply the information still missing, which the Spanish
authorities submitted by letters dated 18 January and
1 and 14 February 2002. A letter from the beneficiary,
dated 23 January 2002, was annexed to the letter of
1 February 2002.

The Commission decision to initiate the procedure was
published in the Official
the European
Communities on 1 December 2001 together with an
invitation
their
comments. The Commission received no comments
from interested parties.

interested

submit

parties

Journal

to

to

of

By decision of 7 May 2002 the Commission extended
the procedure to include new measures. By letter of
13 May 2002 the Commission informed Spain of its
decision. Spain submitted further information by letters
dated 2, 10 and 15 July 2002. The decision to extend
the procedure was published in the Official Journal of the
European Communities on 10 July 2002. The Commission
received one comment on 15 July 2002, to which the
Commission invited Spain to react by letter dated
4 September 2002. Spain submitted its comments on
11 October 2002.

(4)

(5)

By letter dated 19 September 2001, the Commission
informed Spain that
it had decided to initiate the
procedure laid down in Article 88(2) of the Treaty and
requested further information on the possible State aid
measures. By letter dated 19 October 2001, the Spanish
and
requested more
authorities
provided
dated 5 and
incomplete
information by
the Spanish
9 November 2001. By the same letter

time,
letters

II. DESCRIPTION

1. The company

(1) OJ C 399, 1.12.2001, p. 6 and OJ C 164, 10.7.2002, p. 6.

(6)

The company Hilados y Tejidos Puigneró SA (hereinafter
is active in the production of yarns and
‘Puigneró')

23.12.2003

EN

Official Journal of the European Union

L 337/15

in textile finishing and has

its
fabrics as well as
registered office
company was
in Barcelona. The
founded in 1957 and is privately owned by the Puigneró
family.
In 1982 the company was converted into a
limited company. Puigneró operates three plants at Sant
Bartomeu del Grau, Roda de Ter and Prats de Lluçanès.
All three areas are defined as assisted areas according to
Article 87(3)(c) of the Treaty.

a

the possibility of

company whose assets

exceed its
1922 grants
liabilities
suspending payment of
certain individual debts while at the same time being
allowed to continue trading to avoid worsening its
financial situation. On the basis of agreements with its
creditors, a decision lifting the suspension of payments
is about
to be adopted or may already have been
adopted.

(7)

By decision of 10 November 2000, the Court of First
the
Instance No 4 at Vic (Barcelona) declared that
company was in suspension of payments and therefore
insolvent. The Suspension of Payments Act of 26 July

(8)

According to data from 1998 Puigneró was the biggest
company in the sector in Spain in terms of workforce
and the second biggest in terms of turnover. Some key
data describing the company are presented below:

1993

1994

1995

1996

1997

1998

1999

2000

(EUR million)

Workforce

Turnover

Balance sheet total

Operating result

Result for the year

–12,09 (2)

n.a.

115

158

4,69

2,16

n.a.

142

163

6,38

0,82

1 600

1 800

1 600

126

162

6,47

1,05

98

177

90

184

6,70

–32,97

1,65

–104,70

124

3,99

2,33

124

9,35

8,82

(9)

(10)

(11)

information,

in 2001
According to recent
amounted to EUR 62 million, 32 % lower
than
estimated. Losses in 2001 amounted to EUR 2,5 million.
The workforce has been reduced to 780 employees.

turnover

Puigneró sells 60 % of its output domestically, disposes
of some 30 % on the European market and exports the
remaining 10 % to Tunisia and Morocco.

Considering Puigneró's workforce (more than 250), the
company does not qualify as a small or medium-sized
in accordance with Commission
enterprise
(SME)
Recommendation
1996
96/280/EC
concerning the definition of small and medium-sized
enterprises (3).

3 April

of

the company was

guarantees issued by public institutions. This indicated
that the company did not enjoy the confidence of the
private financial markets. Following the Court decision
declaring that
in suspension of
payments, the company also received a loan, amounting
to ESP 2 000 million (EUR 12,02 million), from a public
institution, the ICF. The complainant therefore took the
view that Puigneró had distorted competition through
its manifest non-compliance with its public obligations.
The complainant also maintained that Puigneró had
already been declared in suspension of payments on
previous occasions.

2. The complaints

(13)

The second complainant also stressed Puigneró's large
debt towards the tax and social security authorities. In
its view, the public authorities had failed in their duty to
It also
enforce mandatory collection of
suspected that the loan referred to above lacked valid
guarantees, in which case it constituted State aid.

the debt.

(12) According

to

the

first

complainant,

Puigneró
accumulated significant debts with various public
institutions,
including substantial amounts of unpaid
taxes and social security contributions. The company's
public debt exceeded its annual turnover. Only 2 % of
its liabilities was owed to banks, and these liabilities
secured by
consisted mainly of

commercial

loans

(2) This figure is mentioned in subsequent annual accounts as a
negative tax base to be offset against any future profits. The result
for that year may have been a bigger loss, but not a smaller one.

(3) OJ L 107, 30.4.1996, p. 4.

(14) Moreover,

in a subsequent

letter both complainants
raised concerns over the pricing policy applied by the
company, especially in the textile-finishing sector. They
claimed that Puigneró was distorting competition on the
relevant market by selling its products at below
production cost.

L 337/16

EN

Official Journal of the European Union

23.12.2003

(15)

The Commission received a third letter from the first
complainant, underlining its concern that Puigneró was
continuing to benefit from a transfer of public funds
and was therefore distorting trading conditions on the
market. However, a few months later it withdrew the
complaint.

3. The market

(16)

suffer

industry

from overcapacity.

The textile market in the European Union is a saturated,
the
highly competitive market. Several subsectors of
textile
EU
employment
in the textile and clothing sector has
greatly declined, leading also to a fall in the number of
enterprises operating in these sectors in recent years.
Over the period from 1995 to 1999, production in all
the textile industry declined, with the
subsectors of
exception of
textiles, where
industrial
production rose slightly (measured in constant prices).
Decreases were strongest in yarn and thread, followed
by textile finishing. Apparent consumption of textiles
also decreased (4).

and other

(17)

The yarns sector is also the most worrying for Puigneró
due to its low profitability and competitiveness
in
relation to competitors in Asian and North African
countries. The yarns sector represented 23 % of total
turnover according to the figures available for 2000;
finished and printed fabrics made up the bulk of the
company's annual turnover, accounting for 50,6 % in
2000.

4. The aid measures

(18)

The following measures have been taken in favour of
Puigneró:

4.1. Measures taken by the ICF

(19)

Regional Government's Department

The ICF is a public institution operating under the
Catalan
for
Economic Affairs and Finance. It was established by Act
No 2/1985 of 14 January 1985 to assist the Regional
Government in exercising the powers conferred on it by
Catalonia's Statute of Autonomy, with regard to the
financial system, and to act as the main instrument of
the Regional Government's public credit policy. In 1998
the ICF's legal status was changed from an autonomous
financial agency to a public-law entity operating under
private law. The ICF's material resources and capacity to

(4) The EU Textile and Clothing Sector 2000 OETH, May 2000.

subject

It must

establish

Regional Government

to parliamentary control.

take on risks are determined each year in the budget of
the Regional Government. The various departments of
the
sector-based
priorities to be followed by the ICF (5). As an entity
dependent on the Catalan Regional Government, the ICF
file a
is
quarterly report on the guarantees and loans granted
and the results obtained. The ICF is also subject to the
external control mechanisms established both by the
Catalan Public Finance Act and the Catalan Public
Enterprise Statute. The ICF's accounting and financial
statements are thus regularly audited by the relevant
bodies within the Catalan administration. The Regional
Government is responsible for making the managerial
appointments. The Director-General for finance policy
for budget and treasury are
and the Director-General
members of
ICF
granted the following loans and guarantees.

its Management Committee. The

(20)

Loan granted in 1993: ESP 500 million (approximately
EUR 3 million). The loan was granted on 23 April 1993
and formalised on 28 April 1993. Its original duration
was six years with a two-year grace period. For the
remaining four years the instalments on the principal
were to be paid on a quarterly basis (ESP 31 250 000
each). The interest rate was set at Mibor 3-months +
1 %. The duration of the loan was extended to ten years
on 30 May 1996. At that time the first three instalments
had been paid as stipulated. The remaining amount was
to be paid back in 85 monthly instalments of
ESP 4 779 412 (EUR 28 725) each.

(21) As

security Puigneró provided a mortgage on its
site at Prats de Lluçanès. The mortgage
industrial
totalled ESP 970 million (EUR 5 829 817), of which
ESP 50 million (EUR 300 506) was for execution costs.
At the time, this site was already burdened with four
other mortgages,
two of which for a total value of
ESP 500 million, dating from 31 July 1992 and
4 September 1992 respectively. The third provided
security for an amount of ESP 50 million (EUR
300 506). The value of
the fourth mortgage is not
indicated. The 1995 annual accounts mention this
mortgage as being for a total of ESP 1 200 000 000
(EUR 7 212 145), but this amount concerns both the site
at Prats de Lluçanès and that at Roda de Ter, which is
worth 3,5 times more. The actual loan secured by this
mortgage amounted in 1995 to ESP 495 350 000 (EUR
2 977 114). The decision by the ICF specifies that the
loan was
in the
company owned by the main shareholder, but this is
not
In the
extension granted in 1996 this guarantee is mentioned,
however.

formalised in the original document.

secured by shares

to be further

(5) The 2000 annual report states that one of the main reasons for
withdrawal of an application is non-compliance with these
sector-based priorities (p. 14).

23.12.2003

EN

Official Journal of the European Union

L 337/17

(22)

The outstanding part of the loan at the start of the
suspension of payments procedure
to
ESP 82 678 246 (EUR 496 906,27).

amounted

(27)

(23) Guarantee

in

ESP

1996:

granted

600 million
(approximately EUR 3,61 million). The guarantee was
granted on 2 July 1996 and formalised on 10 July 1996
for three years. It served to guarantee commercial credit
lines provided by several banks up to a maximum
amount of ESP 600 million (EUR 3,61 million). The
credit provided by the banks was to total ESP 750 million
(EUR 4,51 million). The guarantee was subsequently
extended for a further two years on 31 March 1999.
The cost of the guarantee consists of 0,5 % by way of a
fee
and risk
premium.

and 1,75 % in administrative

costs

guarantee

a personal

(24) As securities Puigneró provided a mortgage on seven
properties,
from the main
shareholder and 9 620 shares in the company (66,8 %
of the total number of the company's shares). Two of
the properties formed part of the industrial site at Prats
de Lluçanès, the others were apartments and houses at
Prats de Lluçanès (6). The mortgage provided security
for a maximum amount of ESP 1 135 055 866 (EUR
6 821 823), of which ESP 105 586 592 (EUR 634 588)
was for execution costs. This total amount corresponds
to the execution value mentioned in the contract. The
nominal value of each share is ESP 500 000;
the
execution value of each share mentioned in the contract
is ESP 17 954. The maximum coverage of all the shares
is ESP 154 944 134 (EUR 931 233).

(25)

The original guarantee and the first extension never had
to be called as all the obligations were met. Various
properties had already been distrained by the Tax
Agency and mortgaged in favour of other creditors. It
seems that another mortgage on a property owned by
the main shareholders was later added for security.

(26) Guarantee

in

ESP

1998:

granted

500 million
(approximately EUR 3 million). The guarantee was
granted on 4 June 1998 for a maximum period of three
years. The guarantee covered 50 % of the amount of a
number of policies relating to discounting of bills which
had been agreed between Puigneró and two banks. The
cost of the guarantee is the same as above, and the
security consisted of a mortgage on 23 properties of
which 15 were owned by Puigneró and eight by the
main shareholder. These properties formed part of the
industrial site at Sant Bartomeu del Grau or were
houses in that locality. The execution value of all these
properties together mentioned in the guarantee is ESP
It appears that this guarantee has not
1 075 million.
been called either.

(6) The houses at Prats de Lluçanès were valued at ESP 163 million
(EUR 0,98 million) in July 2001. No previous valuation of the same
properties exists.

The guarantee agreements include a clause according to
which the value of
the securities given has to be
revalued and the shortfall made up by other securities if
the accounting value of the shares decreases by 10 % or
more. This was indisputably the case as the company
was declared insolvent by the Court in November 2000.
However, the ICF states that it did not enforce the clause
on the topping-up of
the guarantee since it was
unaware of the existence of other assets.

(28)

Extension of guarantees in July 2001; reduction to a
total of ESP 800 million (EUR 4,8 million): the 1996
and 1998 guarantees were once more extended by a
further two years until 2003 on 17 July 2001. On this
occasion the total amount covered by the guarantee was
reduced to ESP 800 million (EUR 4,8 million). The risk
premium was not modified, nor were further securities
added.

(29) Modification of guarantees

by

reducing

coverage

in November 2001: on
29 November 2001 the two guarantees were modified
once more,
another
the
ESP 300 million (EUR 1,8 million). This amount was
used to guarantee a loan to cover
the severance
payments related to the restructuring (basically deriving
from closure of the site at Roda de Ter). This guarantee
is
the others. The
modifications did not affect the mortgages by which the
guarantee was covered. Spain maintains that the actual
total value of
the guarantees amounted to ESP 800
million (EUR 4,81 million).

July 2003 like

valid until

(30)

(31)

another

year. The

Loan granted on 14 December 2000: The loan amounts
to ESP 2 000 million (EUR 12,02 million) and was
initially granted for one year. It was subsequently twice
extended by
is
Euribor 3 months +1 %. The loan is conditional on
implementation of a detailed action programme for
temporary
bring
2001
improvement in the company's cash flow. It is therefore
explicitly devised as a bridging measure to enable the
company to meet its day-to-day running costs and carry
on its business ‘normally'.

interest

about

aims

rate

and

to

a

sites)

three

the loan consist of a
The securities provided for
mortgage on 27 properties owned by the company
and on 10
(including the
industrial
properties owned by the main shareholder,
together
with shares in the company provided by its shareholders
(14 400 shares with a nominal value of ESP 500 000
each)
the main
shareholders. The total execution value of the properties
mentioned in the mortgage is ESP 3 570 million (EUR
21 396 030,92). As for the properties owned by the
shareholders, no valuation was provided.

guarantee

personal

and

by

a

L 337/18

EN

Official Journal of the European Union

23.12.2003

(32)

Puigneró met the interest payments on the loan, at least
until November 2001.

(33) Agreement on deferral and remission of debt reached as
part of the suspension of payments procedure: the ICF
subscribed to the agreement between Puigneró and its
preferential creditors. This agreement does not concern
the 2000 loan, which was granted after the suspension
of payments procedure was initiated. The total debt
covered by the suspension of payments procedure is
ESP 149 590 014 (EUR 899 054). 39,70 % of the debt
was to be paid out of the sale of the industrial site at

to
Roda de Ter. For
subscribe to the agreement with ordinary creditors,
which provided for a debt remission of 70 %.

the remaining debt

ICF was

4.2. Deferral and remission of social security debt

(34)

The social security authorities charged the legal interest
rate on all the debts. According to the annual accounts,
the debt at the close of each year amounted to the sums
indicated in the following table.

1992

1993

1994

1995

1996

1997

1998

1999

2000

(ESP million)

Social security debt

k. A.

k. A.

4 727,3 5 259,8 5 996,3 6 190,2 7 288,7 8 815,7 9 963,1

(35) As for the various arrangements on payment in instalments and rescheduling of the accumulated

debts, at least the following agreements were concluded (7):

Date

Amount
(ESP million)

Amount
(EUR)

Mortgage on:

December 1989 (8)

671,5

4 036 109

Industrial site at Roda de Ter

21 February 1996

5 097,6

30 637 419

Not established. Intention was to
mortgage the industrial site at Roda de
Ter

Maximum burden on
the property
(ESP million)

4 612,2

n.a.

25 November 1999

6 778,5 40 739 884

Industrial site at Roda de Ter

8 815,7

(36)

The entry into force of the agreements was subject to Puigneró formalising the relevant mortgages
in the public register and complying with its current obligations as well as paying the instalments
stipulated in the terms. The Commission notes, however, that the annual accounts for 1995, 1996,
1997, 1998 and 1999 all mention a mortgage in favour of the social security authorities for an
amount of ESP 4 612 105 000 (EUR 27 719 309). This amount is raised only in the 2000 annual
accounts to ESP 8 815 705 000 (EUR 52 983 454). The mortgages mentioned were placed only on
the industrial site at Roda de Ter.

(7) The Spanish authorities have provided copies of the more recent
agreements, whereas the company's financial statements provide
information on earlier agreements. Moreover, further agreements
are mentioned in the statement of affairs for the suspension of
payments as of 10 November 2000. It should be noted that any
new agreement with the same authority covers new debt together
with accumulated previous debt.

(8) The exact amount of

the agreement has not been confirmed,
therefore the amount shows the approximate amount remaining to
be paid on 31 December 1995. The same amount still remained
unpaid on 31 December 1996.

23.12.2003

EN

Official Journal of the European Union

L 337/19

(37)

Following non-compliance with the 1996 agreement, the social security authorities imposed the
following distraints on the company's assets:

Date of Decision

Amount (ESP)

Amount (EUR)

Properties concerned

30.9.1997

5 814 331 967

34 944 839

Industrial sites and various dwellings at Sant
Bartomeu del Grau and Roda de Ter

14.10.1998

984 328 232

5 915 932

Ditto

8.9.1999

849 654 219

5 106 525

Only industrial sites at San Bartomeu del Grau
and Roda de Ter

June 2001

Same properties as in 1997 and 1998

(38)

The 1999 agreement was signed in November of that
year, despite Puigneró's repeated failures to fulfil the
terms of the previous agreements. The new agreement
included the debt covered by the previous agreements
together with newly accumulated debt. In addition to
what was common to the other agreements,
this
agreement expressly stated that the authorities reserved
of
securities
the
to
right
non-compliance
into
to
mortgages on the properties serving as securities. It also
stated that in the event of the slightest non-compliance
the authorities would initiate the enforced collection
procedure. According to Spain, this agreement did not
in fact come into effect since the company failed to
meet its payments.

the
distraints

in
convert

call
and

event

(39)

Puigneró did not fulfil the terms of these agreements.
The social
receive any
security authorities did not
interest payment at all on the rescheduled debts.

(40)

In the light of points 35 to 39 above, the Commission
finds that none of the new debts accumulated after the
1989 agreement were covered by any guarantee until
the distraint imposed in 1997. Furthermore, according
to the debt rescheduling agreements a mortgage was to
be established only on the industrial site at Roda de Ter.
the
The distraints concerned dwellings as well as
industrial site at Sant Bartomeu del Grau. The industrial
site and dwellings at Prats de Lluçanès were not affected
at all.

(41)

The debt to social security recognised in the suspension
of payments procedure amounts to ESP 7 871 million
(EUR 47,3 million). This debt can be broken down as
follows:

(EUR)

Site

Period

Debt

Roda de Ter

11.1990 to 9.2000

1 735 524,19

Prats de Lluçanès

11.1998 to 9.2000

1 327 762,56

Sant Bartomeu del
Grau

4.1990 to 9.2000
7.1977 to 12.1983

40 369 520,83
3 874 704,99

Total

47 307 512,57

its preferential

(EUR 18 818 879,24 in the

(42) On 16 July 2002 Puigneró reached an agreement with
all
(except one) on debt
creditors
rescheduling and remission. Puigneró undertook to sell
off within three years its production plant at Roda de
Ter with the aim of obtaining a selling price of EUR 47
million. The proceeds of the sale would be used to pay
each preferential creditor a minimum of 39,7 % of its
social
claims
security).
If a higher value were to be obtained, the
difference would be distributed among all creditors. Of
the remaining debts 70 % would be remitted and 30 %
(EUR 8 546 552,84 in case of social security) would be
rescheduled over a period of 12 years, with no payment
in the first year, increasing instalments and an interest
rate of 3 %. The other preferential
that
subscribed to this agreement include the Catalan Water
Agency, the Official Credit Institute and the ICF.

creditors

case of

4.3. Deferral and remission of tax debt

(43)

The debt to the tax authorities decreased from 1992 to
1994 and in 1997. In 1998 and later years, it increased
substantially. The Tax Agency also charged the legal
interest rate on all the debts, to be paid together with
the principal. According to the annual accounts, the tax
debt at the close of each year amounted to the sums
indicated in the following table:

L 337/20

EN

Official Journal of the European Union

23.12.2003

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001 (9)

Tax debt

3 516,6

n.a. 2 426,2 2 805,3

2 791,7 2 023,0 3 073,3 3 738,0 7 364,0

7 720,3

(ESP million)

(44) As for the various arrangements on payment in instalments and rescheduling of the accumulated

debts, at least the following agreements were concluded (10):

Date

Amount
(ESP mil-
lion)

Amount
(EUR)

Properties to be mortgaged

9 March 1990 (11)

1 474,4

8 861 118 Unknown

19 October 1992

3 516,6 21 135 184 All three industrial sites including
machinery. However, the property
register does not mention any
mortgages on the sites at Prats de
Lluçanès and Sant Bartomeu del Grau,
neither do later guarantee agreements
refer to such mortgages, so it appears
that these were not established.

5 October 1999

4 018,8 24 639 554 Maintenance of mortgage on industrial

site at Roda de Ter in order to cover
ESP 1 195,1 million of debt and new
mortgage on (all) the company's
machinery in order to cover the
remaining debt

Maximum burden of the
mortgage
(ESP million)

Unknown

6 702,7

Not established,
agreement cancelled. The
2000 annual report,
however, mentions a
burden on all three
industrial sites and
machinery for a total
value of 6 058,9.

(45)

its

and

register

complying with

The entry into force of the agreements was subject to
Puigneró formalising the relevant mortgages in the
public
current
obligations as well as paying the instalments stipulated
furthermore
in the terms. The 1999 tax agreement
expressly stated that the authorities reserved the right to
call securities in the event of non-compliance. As for
the 1999 agreement with the social security authorities,
the authorities reserved the right to convert distraints
into mortgages on the properties serving as securities. It
slightest
also stated
non-compliance
the
enforced collection procedure.

authorities would initiate

event of

in the

that

the

the

(46)

Puigneró did not fulfil the terms of these agreements. It
paid only the first instalments.

(9) Estimate made by the Tax Agency on 27 December 2001.
(10) The Spanish authorities have provided copies of the more recent
agreements, whereas the company's financial statements provide
information on earlier agreements. Moreover, further agreements
are mentioned in the statement of affairs for the suspension of
payments as of 10 November 2000. It should be noted that any
new agreement with the same authority covers new debt together
with accumulated previous debt.

(11) The exact amount of

the agreement has not been confirmed,
therefore the amount shows the amount remaining to be paid on
31 December 1995.

(47) When Puigneró failed to make the scheduled payments
the Tax Agency decided to impose distraints and
mortgages for an amount equivalent to the debt. The
following distraints were imposed on the company's
the
assets as
company was in suspension of payments:

listed in the decision declaring that

Date of
decision

Amount
(ESP mil-
lion)

Amount
(EUR)

Property concerned

22.4.1991

807,3

4 851 937 Industrial sites at Sant

Bartomeu del Grau and
Roda de Ter and 12 other
properties, but apparently
not the industrial site at
Prats de Lluçanès

1996

478,8

2 877 935 Dwellings at Prats de
Lluçanès

6.3.1998

2 050,4 12 322 888 All three industrial sites

and almost all houses and
apartments owned by the
company

23.12.2003

EN

Official Journal of the European Union

(48)

(49)

From the above, the Commission concludes in the first
place that the Tax Agency apparently considered the site
at Roda de Ter sufficient collateral until 1996, when an
additional distraint on houses and apartments at Prats
de Lluçanès was established.

The total amount covered by the mortgages at the start
of
the suspension of payments procedure was ESP
3 486 million. The recognised debt to the Tax Agency
in the suspension of payments procedure amounted to
ESP 7 584 million (EUR 45,6 million). The debt can be
broken down as follows:

Period

Capital

Surcharges

Interest

Total

1978-1990

4 843 837

1 514 548 8 535 310 14 893 695

L 337/21

(ESP)

Property

Value of the
mortgage

Beneficiary

Dwellings

27 000 000 Caja de Ahorros

Comarcal de Manlleu

Dwellings

40 000 000 Caja de Ahorros

Comarcal de Manlleu

2 725 000 000 ICF

6 058 859 000 Tax Agency

Industrial site at Prats
de Lluçanès and along
the road from Vic to
Gironella

Industrial sites at Sant
Bartomeu del Grau,
Roda de Ter and Prats
de Lluçanès

1987-1991

2 554 166

510 833

558 068

3 623 067

Total

18 416 564 000

1982-1992

976 503

195 301

213 359

1 385 163

1989-1991

2 351 018

535 244 2 313 660

5 199 922

1991-2000 16 335 366 3 267 073

2 170 619 21 773 058

(52)

Total

27 060 890 6 022 999 13 791 016 46 874 905

(50) On the basis of

the agreement concluded between
Puigneró and its preferential creditors on 16 July 2002,
the Tax Agency was to receive a minimum amount of
EUR 18 550 936,36 out of the proceeds of the sale of
the site at Roda de Ter. For the remainder of the debt,
the Tax Agency also subscribed to the agreement with
ordinary creditors, under which it was to receive a
further EUR 8 424 303 over a period of 12 years.

(53)

The properties owned by the company are noted with
the value at which they were entered in the property
register. Some of them were registered in the 1960s and
1970s and the majority during the 1980s. Therefore, the
mortgages that burden these properties far exceed the
value mentioned in the register.

that were to be mortgaged. Twenty of

In the context of the 1992 agreement with the Tax
the latter's technical department valued the
Agency,
the
assets
properties,
Sant
Bartomeu del Grau, Roda de Ter and the smaller one at
Prats de Lluçanès, were estimated to be worth ESP
8 994 million (EUR 54,1 million) (12).

industrial

including

sites

the

at

4.4. Properties, mortgages, distraints and value of assets

(51) As can be seen from the above, almost all properties
loans and
served as
the period in question. An
guarantees
overview is provided in Annex I to this Decision. The
2000 annual accounts provide the following description:

collateral
throughout

for various debts,

(ESP)

Property

Value of the
mortgage

Beneficiary

Industrial site at Roda
de Ter

Industrial sites at Sant
Bartomeu del Grau
and Prats de Lluçanès

8 815 705 000 Social security

1 200 000 000 Fondo de Garantía de

Depósitos en
Cooperativas de
Crédito

(54) Another valuation by an independent valuer, dated
20 May 2001, concerned only the industrial site at Roda
de Ter
(No 2 994), whose value was estimated at
ESP 10 000 million (EUR 60 101 210). According to
Spain, no further assessment of the value of the other
properties was made before the new valuation carried
out in July 2001.

(12) As a matter of fact, there were two agreements in 1992. The first
agreement concerned the industrial sites at Roda de Ter and Sant
Bartomeu del Grau and a number of dwellings in those localities.
The second carries the same date, but Spain has not provided a
copy of the annex in which the properties are detailed. Some
further dwellings may also have been included in the second
mortgage, but the bulk of that mortgage most likely consisted of
the industrial site at Lluçanès. This is confirmed by the fact that its
value compared to the other value roughly corresponds to the
value of the Lluçanès site in 2001 compared to the value of the
other two sites in the 2001 valuation. The 1995 annual accounts
mentioned that the debt to the Tax Agency was secured by a
mortgage on all three industrial sites. This again confirms the
likelihood that the second agreement concerned the industrial site
at Lluçanès, even though the mortgages on this site and on the
site at Sant Bartomeu del Grau were not formalised.

L 337/22

EN

Official Journal of the European Union

23.12.2003

(55)

required Puigneró to commission an
The Court
independent expert to value all its assets. The valuation
is dated 21 July 2001 and was carried out
for the
purpose of drawing up the company's statement of
affairs for the suspension of payments proceedings. The
valuation in 2001 established the values as presented in
the table below. The Commission notes that the auditor
did not approve the creation in Puigneró's accounts of a
revaluation reserve on the basis of this new valuation.
In his report on Puigneró's financial statement for 2000,
he commented that this revaluation reserve introduced
into the equity funds did not comply with generally
accepted accounting principles (13).

(57)

III. GROUNDS FOR INITIATING THE PROCEDURE
UNDER ARTICLE 88(2)

the

that

The Commission considered
conditions
according to which Puigneró had been able to defer its
public debt appeared to include elements of State aid. In
arriving at this conclusion the Commission particularly
noted the significant length of time over which these
debts had accumulated. The Spanish authorities did not
seem to have taken any action with a view to enforcing
debt collection as provided for under Spanish law.
Moreover, according to the information provided by the
Spanish authorities, at least a partial debt waiver was
envisaged.

Item

ESP million

EUR million

Industrial sites

16 156,9

97,1

Dwellings

Machinery

1 160,5

7,0

(58)

6 683,2

40,2

Other installations

1 734,7

10,4

Total, including also transport
equipment, tools, stocks etc.

29 443,7

177,0

The Commission also took the view that the conditions
according to which the EUR 12,02 million loan was
granted appeared to include elements of State aid, given
that Puigneró appeared to be a company in difficulty
and the funding was provided by a public body at the
same interest rate as that applied to companies not
facing financial difficulties. Furthermore,
it remained
unclear whether the guarantees provided for the loan
were valid and sufficient.

(59) During the course of

the investigation procedure it
became apparent that Puigneró had received previous
loans in 1993 as well as two guarantees, in 1996 and
1998 respectively, from the same public body as above,
namely the ICF. As Puigneró was already in difficulty it
was doubtful whether the securities provided, consisting
mainly of
secured all other
transactions, were sufficient and valid. Hence, given the
low cost of the loan and the guarantees, the possibility
could not be ruled out
these transactions too
included elements of State aid.

the same assets

that

that

(56)

for

values

constant

assuming

the properties,

Based on these
the
Commission made an estimate of the values in previous
years,
equal
increments for the industrial sites at Roda de Ter and
Sant Bartomeu del Grau. Since Spain has not submitted
more precise information,
the Commission has no
alternative but to rely on these calculations. They are
presented in Annex II to this Decision.

increments

and

(13) The statement of affairs included in the Court decision shows
assets totalling ESP 32 086 million (EUR 192,84 million) and
liabilities totalling ESP 22 088 million (EUR 132,75 million), giving
an asset surplus of ESP 9 998 million (EUR 60,09 million). For a
company to qualify for the suspension of payments procedure, its
assets must exceed its liabilities. This may induce companies to
overvalue their assets. It should be noted that, according to the
information available, the value of Puigneró's assets increased by
approximately 67 % between 1992 and 2001. There is no doubt
that a company's properties may increase in value, but some
deterioration will also inevitably take place in buildings over nine
years, especially where the company has been facing financial
difficulties and is unlikely to have any spare cash for major
investments to improve the condition and value of
its assets.
Consequently,
seem to have been
established on prudential principles. However, neither can the
possibility be ruled out that the valuation may reflect a fair market
value.

the valuation would not

IV. COMMENTS FROM INTERESTED PARTIES AND
SPAIN'S RESPONSE

conditions.

(60) According to the Belgian textile federation, Febeltex,
Belgian textile companies active in the clothing sector
had long been competing with Puigneró under
unfavourable
that
Puigneró was applying abnormally low sales prices on
the market, particularly in the United Kingdom, and that
Puigneró's actions had distorted competition in that it
had been able to snatch a large market share from its
European competitors on the Benelux and Spanish
markets.

Febeltex maintained

23.12.2003

EN

Official Journal of the European Union

L 337/23

(61) According to Spain, Puigneró had never been active on
the Belgian clothing market, but in the sectors of yarns
and textile finishing.

V. COMMENTS FROM SPAIN AND PUIGNERÓ

(62)

(63)

a

company

Spain argued that Puigneró was
in
temporary difficulties which had been declared to be in
the
suspension of payments
authorities to recover at
their
claims. The procedure is used in situations where the
economic problems
can be
overcome.

to enable
least a proportion of

temporary

in order

and

are

the

that

furthermore maintained

Spanish
Spain
authorities could not be accused of having remained
inactive since they had granted payment deferrals in
accordance with the legislation in force together with
and instalments. Default
corresponding
in
interest had also been charged as provided for
Spanish law.

guarantees

(64) However, Spain acknowledged that the authorities had
not tried to realise any of the company's assets securing
the public debts. The Spanish authorities defended their
action on the ground that the Suspension of Payments
Act of 26 July 1922 prevents creditors requesting a
declaration of
for
suspension of payments are in progress.

bankruptcy while proceedings

(65)

Spain gave two main reasons for not having initiated
any enforced executions: first, that Spanish labour law
gave preferential treatment to employees and, second,
that an enforced liquidation of assets was likely to yield
a lower price than their market value. The Spanish
authorities therefore took the view that the option of
using deferrals and distraints had proved preferable as it
had placed them in a better position in the suspension
of payments proceedings.

(66)

The Spanish authorities furthermore claimed that they
had acted as a diligent creditor by imposing distraints
and mortgages on Puigneró's assets equivalent to the
value of
claims. They thus maintained that
securities were sufficient to cover the entire debt.

their

(67) As for the current situation, the authorities argued that
enforced collection would make it extremely difficult to

the

entire debt, partly because

severance
recover
payments take precedence over all other claims and
partly because of the low price that would be obtained
for the mortgaged assets in a public auction.

(68)

its part,

For
the company supposed that practical
reasons may have prompted the authorities to decide
not to proceed with an enforced sale of assets, as it was
easier for the public authorities to try to recover the
debt by allowing the company to continue trading than
to initiate an enforced liquidation.

(69) As for the agreements that Puigneró concluded with it,
the ICF maintained that the securities provided were at
all times sufficient to cover the loans and guarantees
granted. According to the ICF, although most of the
properties, around 27 in number and including all the
industrial plants, had already been distrained by the
social security and tax authorities, and 10 additional
properties owned by the shareholders had been given to
secure guarantees previously granted by the ICF, it was
confident that the remaining value of the mortgage was
sufficient to cover the new loan of EUR 12,02 million
granted in December 2000.

(70) On the other hand, Spain also stated that given the
semi-mountainous area where the plants are located and
the significant value of the plants, an enforced sale of
assets would be unlikely to yield their full value.

(71)

The Spanish authorities concluded that their actions had
been in accordance with the relevant legislation. They
therefore took the view that a private creditor would
have acted in the same way and that the measures did
not constitute aid.

(72) However, Spain also referred to public objectives, e.g.
the villages in which two of the three industrial sites are
located are very small; Sant Bartomeu del Grau has
some 1 215 inhabitants and Prats de Lluçanès has some
2 790.
suspension of payments
proceedings, the main concern of the public authorities
(and at all events of the Catalan Regional Government)
was to minimise the economic and social impact that
could result from Puigneró's difficult situation.

In the ongoing

(73)

In its letter of 23 January 2002 Puigneró used a similar
line of argument with a view to demonstrating that it
had not received any illegal aid. As regards the 2000
loan from the ICF it stated, in support of that position,
that given the collateral available it could have obtained
a loan from private sources under the same conditions.

L 337/24

EN

Official Journal of the European Union

23.12.2003

VI. VIABILITY PLAN

(74)

Spain submitted a viability plan worked out
for
Puigneró by a consultancy firm located in Barcelona.
The plan was dated November 2000.

It was to close down its
activities (chiefly spinning).
plant at Roda de Ter, which would subsequently lead to
reductions in other sectors, such as weaving.
In the
future it would concentrate on products with higher
added value, such as finished textiles. As a consequence,
there has been a substantial reduction in the workforce.

of

extreme

(75) As for the reasons that led to the company's difficulties,
the plan ascribed these mainly to the globalisation effect
and
producers
price-competitiveness
established outside the European market, which had
radically
the
company's future prospects, turnover was expected to
remain at around the same levels as in 1999 and 2000.
As a reduction in prices was anticipated, an increase in
turnover was to
production was assumed. Moreover,
increase at an annual rate of around 9 % from 2003 to
2005. Thus, no reduction in capacity was planned.

changed market

conditions. As

for

(78)

The company expects to generate gross operating profits
as from 2002 and profits from 2004 onwards. The
company is confident that these funds, together with the
proceeds of the divestment of unproductive assets, will
enable it to fulfil its obligations under the suspension of
payments procedure.

(76)

The plan was rather general as regards financial aspects.
It did not
foresee any investor contribution to the
restructuring of the company. Neither did it indicate
clearly the total cost of the restructuring, nor did it
provide details on how the restructuring would be
financed (timetable, method of raising the necessary
finance, etc.). A major ‘source' of finance was to be the
debt remission by the public authorities.

(79)

(77)

July 2002,

the Spanish authorities
In their letter of
submitted a new version of the viability plan updated by
Puigneró. In short, according to the new version, the
company planned to reduce capacity in its loss-making

VII. ASSESSMENT

1. Puigneró's financial situation

into

agreements

time. First of all,
on

Puigneró has been facing financial difficulties over an
the company
extended period of
entered
in
instalments with the social security and tax authorities
on several occasions, at
in 1989, 1990, 1992,
least
1996, 1999 and 2000. According to the available
financial data,
the company has had insufficient net
assets for several years. The equity situation has evolved
as follows:

deferral/payment

(ESP million)

Equity funds

1993

1994

1995

1996

1997

1998

1999

2000

Share capital

2 884

5 500

5 500

7 200

7 200

7 200

7 200

7 200

Revaluation reserve

—

—

1 615

1 615

Other reserves

392

392

392

392

—

—

— 14 422

—

—

Accumulated results

(5 809)

(5 420)

(3 953)

(3 593)

(1 450)

(1 275)

(1 000)

Result of the year

389

1 467

360

136

174

275

(17 421)

Total equity

472

1 939

5 614

5 750

5 925

6 200

3 201

Adjusted total (14)

(11 221)

(14) Adjustment made on the basis of the comments by the company's

auditors (see point 55).

23.12.2003

EN

Official Journal of the European Union

L 337/25

(80) As can be seen from the table, Puigneró had already lost
its equity by the end of 1994 (15). On
most of
7 June 1994 the share capital was
increased by
ESP 2 616 million (EUR 15 722 476,65). The equity level
was restored to a sufficient level by a second capital
increase only in 1996. The restoration was achieved to a
large extent through a revaluation of assets that was
subsequently cancelled to balance out some of
the
accumulated deficits. No fresh capital was therefore
injected in respect of the amount of the revaluation.

(84) Another confirmation of

the company's protracted
financial difficulties lies in the fact that in no year has
Puigneró succeeded in complying fully with its tax and
social security obligations, as regards both its new
obligations and the instalments payable under earlier
agreements. Although the Commission has no precise
information on this for the year 1993, it must be noted
that in that year in particular a substantial
loss was
incurred, whereas Puigneró had negotiated a debt
rescheduling with the tax authorities just before.

In 2000 total losses amounted to – ESP 17 421 million
(– EUR 104,7 million), an amount exceeding the
company's turnover of ESP 14 914 million (EUR 89,6
million).
the
expenditure included ESP 1 748 million (EUR 10,5
in extraordinary expenditure and ESP 8 166
million)
million (EUR 49,1 million)
in charges pertaining to
previous years.

In addition to normal operating costs,

(85)

(86)

Finally, it must be borne in mind that throughout the
period under consideration the company was active in a
sector that was suffering from strong competition from
outside the EU (see points 16 and 17).

least

It therefore has to be concluded that the company has
at
since 1993 been struggling with financial
difficulties which have led to the current suspension of
payments procedure. It thus meets the definition of a
company in difficulty according to the Community
guidelines on rescue and restructuring aid.

(81)

(82)

Puigneró partly restored its equity, although not to a
in 2000 by introducing a revaluation
sufficient level,
reserve stemming from an increase in the value of its
fixed assets (properties) following the valuation carried
out by an independent expert on 21 July 2001 (see
points 51 to 56 above). The book value of these assets
increased by over 150 %. However, according to the
auditor's report on Puigneró's financial statement
for
2000, the revaluation reserve introduced into the equity
funds
accepted
accounting principles. The company's equity funds
should therefore be reduced by ESP 14 422 million
(EUR 86,68 million). Consequently, the value of its total
equity funds at the end of 2000 was some – ESP 11 221
million (– EUR 67,44 million). In fact, due to the many
uncertainties in Puigneró's annual accounts the auditors
did not give an opinion on the state of the accounts but
issued a qualified audit report for the year 2000.

comply with

generally

not

did

(83)

Puigneró submitted a provisional balance sheet as of 31
December 2001 in its updated viability plan. The
balance sheet still
includes the revaluation reserve as
the equity. Nevertheless, even allowing this
part of
the equity,
revaluation reserve to constitute part of
solvency ratio (38,7 %)
Puigneró's
sufficient.
it is clear that no fresh financing has been
Moreover,
injected that would provide the business with badly
needed capital.

is not

(15) Exact data on earlier years are not available, but it appears from
the 1995 annual report that the loss of equity must have taken
place before 1994. The Commission notes that the 1995 annual
report mentions losses that can be offset for tax purposes incurred
during the period up to and including 1994 for a total amount of
ESP 1 813,5 million (EUR 10 899 439), while 1994 showed a
modest positive result.

2. Aid within the meaning of Article 87(1) of the
Treaty

(87) Article 87(1) of the Treaty lays down the principle that,
save as otherwise provided in the Treaty, any aid
granted by a Member State or through state resources in
any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings or
the production of certain goods shall,
in so far as it
affects trade between Member States, be incompatible
with the common market.

(88)

The measures described in points 6 to 56 were granted
by the State or through State resources. The tax and
social security authorities form part of the state. The ICF
is a public institution operating under the Regional
Government's Department
for Economic Affairs and
this
Finance. When it grants a selective advantage,
advantage must be regarded as being financed by State
resources and it is attributable to the State (16).

(89)

Yarns, fabrics and finished textiles are products that are
extensively traded within the EEA and between the EEA
and third countries, and their markets are characterised
by fierce competition and suffer from overcapacity. The

(16) The Commission furthermore notes

to
Parliamentary questions the Regional Government replied two days
before the 2000 loan was formalised that it planned to grant the
loan through the ICF.

in response

that

L 337/26

EN

Official Journal of the European Union

23.12.2003

Commission notes that Puigneró is a major player in
Spain in these sectors. Consequently,
if the measures
described in points 6 to 56 constitute a selective
financial advantage, they reinforce Puigneró's position
compared to its competitors in these markets and they
certainly distort or threaten to distort competition and
therefore affect trade between Member States.

(90)

The remaining issue to establish whether or not the
measures described in points 6 to 56 constitute State
aid within the meaning of Article 87(1) of the Treaty is
whether they favour a particular undertaking. For this,
the Commission has to determine whether the measures
benefited Puigneró in a selective way. This is assessed
for each measure below.

3. The 1993 loan and the guarantees provided by
the ICF

(91)

In order to establish whether the 1993 loan and the
guarantees provided by the ICF constitute a selective
advantage, the Commission applies the ‘private investor
principle'. This means that
the Commission assesses
whether under the same circumstances a private lender
would have granted the loan and the guarantees on the
same terms.
If this is the case, there is no selective
advantage in favour of Puigneró.

mortgages and distraints and the loan agreement would
not prevent
the shares
further burdening. Therefore,
would not provide any value for a lender.

II,

the

and Annex

the industrial

the value of

site consists of

(94) As explained in points 6 to 56, a mortgage was created
on part of the industrial site at Prats de Lluçanès. As
the
indicated in paragraph (56)
Commission estimates
industrial
complex of Prats de Lluçanès, including the value of the
dwellings at the site and the machinery, at time the loan
was granted at ESP 1 208,9 million (EUR 7,26 million).
However,
two parts
separately. The
entered on the property
mortgage does not affect the larger of the two, nor the
dwellings and machinery. Moreover, both parts of the
industrial site, together with the other properties, had
already been used as security for debts towards other
institutions, and a substantial proportion of
financial
those debts had not yet been repaid in 1993 (17).
Subtracting this amount from the total value for both
parts of the industrial site leaves an amount which is
clearly less than the maximum value of the mortgage of
ESP 970 million. The actual coverage based on only the
smaller part of the site must be even smaller.

register

(92)

(93)

The 1993 loan

The ICF charged an interest rate that a private lender
would have charged when granting a loan to financially
healthy companies. Given the fact that Puigneró was in
financial difficulties, such an interest
rate was only
justified if the loan was secured by sufficient collateral.
As explained in points 6 to 56, the collateral consisted
in shares in the company and a mortgage on property
owned by the company.

to cover

(95) A private lender would certainly have taken into
account the fact that in the event of a forced public
auction the value obtained can be considerably lower
than the value of a company as a going concern.
Therefore, a private lender in the ICF's position in 1993
would not have considered the securities as sufficient
collateral
the loan and would not have
provided the loan on the same terms. The ICF holds
that in the event of an enforced auction, and where no
itself
third party puts in a sufficient bid, the ICF will
acquire the property. Then as soon as possible, it will
arrange its sale, but under better market conditions, so
that the amount of the entire outstanding debt will be
recovered. However, this would certainly involve costs
and risks that a private lender would not have accepted
on the same terms. Consequently the Commission
concludes that the loan was not granted in conformity
with the private
and therefore
constitutes State aid within the meaning of Article 87(1)
of the Treaty in favour of Puigneró.

investor principle

The nominal value of the 4 200 shares in the company
provided as collateral was ESP 2 100 000 000. They
constitute 29,17 % of the total share capital. However, it
seems that the use of the shares as collateral for the
loan was not formalised. In any case, the actual value of
the shares has
to be established according to the
company's financial situation at the particular point in
time. When the loan was granted the company was in
its assets were burdened by
difficulties. Moreover,

(17) The property register shows mortgages in favour of Fondo de
Garantía de Depósitos en Cooperativas de Crédito (maximum
ESP 1 200 million, debt in 1995 still ESP 495,4 million) and Caixa
d'Estalvis i Pensions de Barcelona (maximum ESP 886 million).
The 1995 annual report also mentions two loans representing a
total burden of ESP 500 million, under which ESP 397,9 million
was still owed in 1995. It is not clear, however, where the smaller
of these last two is registered in the property register.

23.12.2003

EN

Official Journal of the European Union

L 337/27

(96)

instalment of

The extension of the loan in May 1996 does not change
the situation. The company was still in difficulty and the
property was
still mortgaged to guarantee other
transactions, although the outstanding debt under those
transactions had somewhat decreased by that time. The
the loan was paid according to
first
schedule. As explained in point 56 and Annex II, the
Commission estimates the value of the industrial site in
1996 at ESP 1 822,8 million. However, the mortgage
still encumbered only the smaller of the two parts. So
the effective coverage must have been substantially
smaller than the collateral needed to secure the loan
sufficiently. The Commission therefore concludes that
the extension of
the loan also constitutes State aid
within the meaning of Article 87(1) of the Treaty.

The July 1996 guarantee amounting to ESP 600 million
(EUR 3,61 million)

(97)

The ICF charged an annual fee of 1,75 % by way of
administrative costs and risk premium for the guarantee,
which according to the Commission should be viewed
as a fee applied to healthy firms and/or
for loans
secured by sufficient collateral. However, Puigneró was
in serious financial difficulties at
the time and the
collateral consisted in shares in the company, a personal
guarantee provided by the main shareholder and a
number of properties.

(98) As explained above, given that the company was in
difficulty when the guarantee was granted and most of
its assets were mortgaged, the shares in the company
did not provide valid collateral for a guarantor.

(99) As

regards

the personal guarantee by the main
shareholder, the Commission points out that any private
guarantor would prefer a quantified and concrete
security to a general, unspecified commitment. Spain
this
has not provided any evidence of
personal guarantee. In contrast, the main shareholder is
likely to be personally liable for
the tax debt of
ESP 2 282 million, stemming from before the change in
form of the company in 1982, which was
the legal
included in the total tax debt in 2000. The Commission
therefore takes the view that
the personal guarantee
provided by the main shareholder adds little or no
security.

the value of

(100) The smaller part of

the industrial site at Prats de
Lluçanès again served as security for the guarantee, but

the other part and the private dwellings were this time
added as collateral. The dwellings did not account for a
very large share of the value, around 7 % of the total in
2001. Since the smaller part of the site was already
burdened by the mortgage to cover the loan, the major
new asset was the larger part of the site. However, as
explained above, this part of the property was already
these
burdened
mortgages concerned other properties too,
it is clear
that insufficient value was left for covering the new
in particular (but not only) when the 1992
guarantee,
mortgage in favour of Caixa d'Estalvis i de Pensions de
Barcelona, for an amount of ESP 886 million, is taken
into account.

other mortgages. Although

by

that

(101) Taking into consideration the fact that the company was
the Commission
struggling with financial difficulties,
concludes
conditions under which the
the
guarantee was granted do not comply with the private
investor principle. The collateral would have been
for a private guarantor, who would have
insufficient
required further securities and/or would have set a
higher risk premium, or would not have granted the
guarantee at all. The fact that the guarantee has never
been called does not change this assessment. The
Commission therefore concludes that the full amount
covered by the guarantee constitutes aid, since the
company could not have obtained it under
the
conditions granted by ICF.

The 1998 guarantee amounting to ESP 500 million
(EUR 3,0 million)

(102) The annual premium for the 1998 guarantee was again
1,75 %, which, as already pointed out, should be viewed
as a premium applied to healthy firms and/or for loans
secured by sufficient collateral. Puigneró was in financial
difficulties at the time and the collateral consisted of the
industrial site and private dwellings at Sant Bartomeu
del Grau, eight of them owned by the main shareholder.

(103) By the time this guarantee was granted, the company
properties provided as collateral were already burdened
by a mortgage in favour of Fondo de Garantía de
Depósitos en Cooperativas de Crédito,
for a debt of
which only ESP 395,4 million still had to be paid, a
distraint in favour of the Tax Agency for a tax debt of
ESP 2 050,4 million and a distraint in favour of the
social
of
ESP 5 814,3 million. These burdens concerned almost
including the three industrial
all the other properties,
sites. Moreover, the other properties were also already

authorities

security

debt

for

a

L 337/28

EN

Official Journal of the European Union

23.12.2003

the tax
the 1992 mortgage in favour of
burdened:
authorities and the earlier mortgage in favour of the
social security authorities on the site at Roda de Ter,
and the mortgages in favour of the ICF for the 1993
loan and the 1996 guarantee. As stated in point 56 and
Annex II, the Commission estimates the value of all
properties owned by the company, including the private
dwellings and machinery, at ESP 17 284,0 million in
1998. Since the mortgage for the guarantee did not
concern the machinery, it is doubtful whether enough
would be left to cover the guarantee. Moreover, if the
site at Sant Bartomeu del Grau were sold off,
the
distraints obtained by the Tax Agency and the social
security authorities would take priority. The fact that
eight properties owned by the main shareholder were
added as collateral does not change this assessment: the
Commission does not know their value, but
the
maximum for which these properties serve as collateral
ESP 6 947 058 (EUR 41 752).
amounts
ICF
Consequently, by providing the guarantee
incurred a risk for which it did not receive appropriate
remuneration. Therefore,
for similar reasons as those
given in point 101 above, the Commission concludes
that
the guarantee constitutes State aid within the
meaning of Article 87(1) of the Treaty.

to only

the

(104) The ICF argued that, where necessary,

a

to provide

it considered it
more beneficial
company with an
emergency guarantee than to enforce liquidation, which
could prove more harmful for all creditors. However,
when an emergency guarantee is provided under normal
conditions, the risk has to be covered by other means,
such as by an increased risk premium. The ICF's
statement
guarantee
confirms
therefore
constitutes State aid.

that

the

Extension of the 1996 guarantee in 1999

(105) As explained in point 57 and Annex II, the Commission
estimates that by the time the 1996 guarantee was
extended, the value of the property, the complete site
and private dwellings
at Prats de Lluçanès, had
increased. However, so had the burden on the property,
in particular as a result of the distraint obtained by the
Tax Agency in March 1998. There is therefore no need
to reassess whether the guarantee constitutes State aid.

(106)

is

that

clear

the fact

It
the property was
the value of
significantly lower than the total burden on it. Taking
the company was
also into account
struggling with financial difficulties,
the Commission
concludes that the extension of the guarantee does not
comply with the private investor principle. A private
guarantor would have required further securities and/or
would have set a higher risk premium or would not

that

have granted the guarantee at all. The Commission
therefore concludes that the full amount covered by the
guarantee constitutes aid, since the company could not
have obtained it under the conditions granted by the
ICF.

Extension and modification of the two guarantees in 2001

(107)

In 2001 Puigneró was
already in suspension of
payments. Its debt towards the public authorities and
the ICF amounted to ESP 15 605 million (EUR 93,8
million). Puigneró had,
furthermore, received a loan
amounting to ESP 2 000 million (EUR 12,02 million)
from the ICF in December 2000, also secured by the
same properties. As a matter of fact, all the company's
assets,
for the
including those provided as collateral
guarantees, were mortgaged against both the company's
substantial public debt and the loan granted in 2000.

(108) Consequently, given that the extension of the guarantees
against
the

was
insufficient
guarantees has to be deemed to constitute aid.

company
amount of

insolvent
entire
the

an
to
securities,

granted

4. Non-payment of taxes and social security
contributions

(109)

In line with the Commission Decision of 14 October
1998 (18), as confirmed by the Court of Justice (19), the
persistent and systematic non-payment of social security
contributions and taxes constitutes a transfer of public
resources.
a
competitive advantage, since — unlike their competitors
— they are not obliged to defray these costs as would
ordinarily be the case (20).

company

transfers

Such

give

the

(110) As the Court held in Tubacex (21), a good test is to
compare the behaviour of the state with the behaviour
of a private creditor. This was confirmed by the Court
in DMT, where it held that ‘the ONSS (the national

(18) Commission Decision of 14 October 1998 concerning aid granted
by Spain to companies in the Magefesa group and their successors
(notified under document number C(1998) 3211)
(OJ L 198,
30.7.1999, pp.15-27).

(19) Case C-480/98 Spain v Commission [2000] ECR I-8717.
(20) Advocate General Jacobs stated in his opinion of 24 September
in certain
1998 in Case C-256/97 DMT that it was clear that,
circumstances, continued and generous tolerance of late payment
of
security contributions could confer an appreciable
commercial advantage on the recipient undertaking and in
extreme cases be tantamount to relief from those contributions
(paragraph 33).

social

(21) Case C-342/96 Tubacex [1999] ECR I-2459.

23.12.2003

EN

Official Journal of the European Union

L 337/29

security office) must be

compared with a
social
hypothetical private creditor which, so far as possible, is
in the same position vis-à-vis its debtor as the ONSS
and is seeking to recover the sums owed to it' (22). This
is referred to as the ‘private creditor principle'.

and
ascertain the precise value of
mortgages.
Spanish
authorities relied only on a valuation made in 1992 by
the Finance Ministry's technical departments.

the distraints
the

Throughout

1990s

the

their

claims

(111) The Commission takes note of the fact that the social
security authorities and the Tax Agency acted in
accordance with the
applicable Spanish law. The
Commission also recognises the fact these authorities
interest and tried to
charged the mandatory default
and
distraints
secure
mortgages on assets. The question is, however, whether
a private creditor in the same situation would have been
satisfied with these measures or would have proceeded
least a
with an enforced liquidation to recover at
proportion of its claims. From the information available,
the Commission concludes that the Spanish authorities
have not acted in accordance with the private creditor
principle.

imposing

by

(112)

a

total

security

amount

authorities

to these public

standpoint,
In the first place and from a general
substantial tax and social security obligations remained
unpaid for a long time, while the company did not
comply with the payment agreements it entered into.
According to figures provided by the company, between
1995 and 2000 Puigneró paid the Tax Agency and the
social
of
ESP 4 608 675 680 within the periods allowed for
voluntary payment. Over
the same period it paid
ESP 587 966 845 during the enforced collection phase;
all these payments were in fact effected between April
1997 and December 1998. Over the same period, the
total outstanding debt
authorities
increased by ESP 10 173,6 million. From these figures,
from the annual accounts, from the overviews attached
to the various payment agreements and from the tables
in points 42 and 50 it can be clearly seen that most of
the debt corresponded to obligations that remained
unpaid for
years. A significant
several
these obligations remained unpaid for
proportion of
more than five years. A private creditor in the same
situation would not have tolerated arrears over such a
long period,
arrears were
constantly arising and the company was not complying
it had entered into.
with the payment agreements
Despite the legal
that was charged and the
securities that were offered, a private creditor would
have lost confidence in recovering its claims and would
have enforced payment much earlier.

less when further

interest

least

still

at

(113) Secondly and more specifically, a private creditor would
have carried out valuations of the properties in order to

(22) Case C-256/97 Déménagement–Manutention Transport [1999] ECR

I-3913.

(114) Thirdly, a private creditor would have agreed on debt
rescheduling and mortgages only where there were
prospects for an improvement in the situation. When a
debtor fails to fulfil payment agreements it has signed, a
private creditor would normally seek guarantees that the
the company was to improve.
financial situation of
However, the payment agreements of 1992 and 1999
with the Tax Agency and the agreements concluded in
1996 and 1999 with the social security authorities do
not contain any such guarantees or conditions, and the
actual situation of the company demonstrates that there
was no structural improvement. It must be recalled that
the company was in financial difficulties with very low
profits throughout the period between 1994 and 1999.
It was operating in a market that was characterised by
fierce competition, it continued to accumulate payment
arrears and it did not abide by the agreements with the
public authorities. A more coherent restructuring plan
was only submitted in 2000, but this plan had to be
fundamentally overhauled in 2001 since the situation
had continued to deteriorate, contrary to expectations.
So the Tax Agency and the social security authorities
could not have believed that there were clear and well
founded expectations that Puigneró's situation would
the
improve and that
outstanding debts. In such a situation, the usual clauses
whereby the agreements become null and void in the
event of non-payment of any of the agreed instalments
cannot suffice.

it would be able to pay off

(115)

(116)

that

the Commission notes

the Spanish
Fourthly,
authorities
could have proceeded to an enforced
liquidation of a substantial number of properties on
which distraints had been placed to secure the debt, as
these consisted of private flats and houses and would
thus not have impaired the company's capacity to
generate business income. Neither did the authorities
enforce a partial closure of any of the industrial sites.

Fifthly, on various occasions the Spanish authorities
to have acted negligently. According to the
appear
agreements of 29 October 1992 with the
tax
authorities, Puigneró was to establish a mortgage on the
three industrial sites within 30 working days to cover a
total debt of ESP 3 516,6 million. However,
the
company established a mortgage only on the site at
Roda de Ter and only on 5 May 1993. This meant that
the mortgage on the site at Prats de Lluçanès in favour
took
the ICF, which guaranteed the 1993 loan,
of

L 337/30

EN

Official Journal of the European Union

23.12.2003

social

towards

the debt

priority over later distraints that were imposed to secure
the tax debt. Moreover, it was precisely the site at Roda
de Ter that was already burdened in favour of the social
security authorities. The Commission does not know the
exact amount of
security
outstanding in 1992/1993 that was covered by this
amounted to
mortgage, but given that
ESP 4 727,3 million in 1994,
the
that
industrial
site and dwellings at Roda de Ter were
mortgaged for more than their actual value at the time
(ESP 3 758,5 million in 1992). A private creditor in the
same situation would have reacted immediately to the
breach of
taking into
account
the company's financial situation and track
record in paying its debts.

the agreement,

in particular

it assumes

the debt

a

for

total

(117) Similarly, according to the agreement with the social
security authorities of 21 February 1996, Puigneró was
to establish a mortgage
amount of
ESP 5 097,6 million. This mortgage was not formalised
either. Only in October 1997 did the social security
authorities proceed to set a distraint. And finally, neither
did the agreement of 25 November 1999 come into
effect, owing to non-compliance by Puigneró. The total
amount under the distraints of October 1997, October
1998 and October 1999 was ESP 7 648,3 million, which
security debts of
is well below the
ESP 9 963,1 million in 2000. The 2000 annual
accounts also mention a mortgage on the industrial site
security
at Roda de Ter
in favour of
authorities
of
for
ESP 8 815,7 million. It is not clear at what date this
mortgage was established, but as it burdens only the site
at Roda de Ter, it has to be concluded that the social
security
an
overburdening of
this site. A private creditor in the
reacted much earlier,
same
enforcing payment or requiring security for the debt
without delay, above all given the company's financial
situation and track record in paying its debts.

situation would have

once more

the social

authorities

increased

accepted

amount

social

total

an

lower

this mortgage affects all
including machinery. However,

(118) The mortgage in favour of the Tax Agency increased
substantially in 2000 to a total of ESP 6 058,9 million.
Unlike the mortgage in favour of the social security
three industrial
authorities,
is
this amount
sites,
again
2000
in
(ESP 7 364,0 million). As a matter of fact, the 2000
annual results were heavily affected by losses from
earlier years of ESP 2 282,1 million due to an old tax
debt, which probably also explains the substantial rise in
tax debt in that year. This old debt was incurred by the
main shareholder before the change in the legal form of
the company in 1982 and had not been taken into

actual

than

debt

the

in earlier payment agreements. A private
account
creditor would certainly have sought sufficient security
for this debt at a much earlier stage.

are

that

the properties

(119) Sixthly, a private creditor would have duly taken into
account the likelihood that the property would have
fetched a lower price in the event of an enforced
liquidation. This is supported by the Spanish authorities'
statement
located in a
semi-mountainous area and would therefore be less
attractive to possible purchasers. The Spanish authorities
maintain that the price that could be obtained in an
enforced auction is likely to be 50 % of market value at
most. The company itself also maintains that in public
auctions the realised value is in general substantially
lower than the market price, occasionally even lower
than 50 %. This is also supported by the fact that the
ICF initially required a significantly higher value of
securities to cover the principal of a loan or guarantee,
although at a later stage it accepted securities that were
burdened to an extent exceeding their value.

allowed Puigneró to accumulate

(120) The Commission therefore considers that it should have
been evident to the authorities that their position would
their
only worsen by agreeing repeatedly to defer
claims. They
a
significant amount of public debt, amounting to at least
the value of all its total fixed assets if these were to be
sold by means of a public auction. Thus, the Spanish
authorities should have been aware of the fact that their
claims were not
fully covered by the distraints and
these
mortgages
circumstances, it should have been evident to the Tax
Agency and the social security authorities that setting
distraints did not increase the prospects for recovering
their claims, but only made it more difficult to recover
the interest that was accumulating and the new debts
that were arising.

imposed on the

assets. Under

(121) Thus,

in allowing a company in difficulty to go on
trading over an extended period of time, and not using
all the means available under Spanish law to recover
their claims, both the Tax Agency and the social
security authorities reduced their chances of recovering
the amounts owed to them and granted an advantage to
Puigneró that cannot be justified according to the
private creditor principle. As regards the Tax Agency,
this advantage dates back at least to early 1993 when
Puigneró failed to abide by
the 1992 payment
agreement and established a mortgage only on the site
at Roda de Ter, instead of on all three industrial sites. As
regards social security, the advantage dates back at least
to 1995. By that
time the outstanding debt had
increased significantly and the new debt was not
covered by the mortgage that was established before
1992. The first action taken to secure this additional
debt was the unsuccessful 1996 agreement. The aid

23.12.2003

EN

Official Journal of the European Union

L 337/31

continued to exist as no action was taken on the breach
of the 1996 agreement until the October 1997 distraint.
The aid continued thereafter as the debts increased
beyond the amount secured by additional distraints and
as
take
appropriate action following the breach of the 1999
agreement. For both the Tax Agency and social security,
the amount of aid must be considered to be equivalent
to the total debt at the time.

authorities

did not

security

social

the

creditors were

(122) The Spanish authorities argued that, since none of the
private creditors initiated bankruptcy proceedings, the
public creditors behaved in the same way as the private
creditors and their actions did not constitute State aid.
the other
the Commission considers that
However,
creditors were not in the same position as the public
authorities. The main private
the
suppliers. A supplier does not
tolerate persistent
non-compliance with his customer's obligations. When
the risk exposure reaches the supplier's limit, he will
stop supplying or
such as
requiring advance payment or payment guarantees. As a
matter of fact, it is likely that the company was able to
avoid enforced liquidation owing to the lack of private
creditors who would have been more ready to proceed
to enforced collection in the
event of persistent
It may be only due to the guarantees
non-payment.
granted by the ICF that
the company continued to
obtain supplies for production. Moreover, enforced debt
collection by the public authorities may not have led to
a complete bankruptcy, but could have led to a partial
liquidation of the least profitable part of the company.
The Commission therefore concludes that this argument
fails to prove the absence of State aid.

take other measures,

the existing debts at the time that procedure started and
are therefore relatively well protected. Consequently, the
acceptance of new debts by
security
authorities and the Tax Agency does not constitute
further aid to Puigneró.

social

the

persistent

(125) The Commission therefore concludes that the persistent
non-payment of taxes between early 1993 and the start
of the suspension of payments procedure in 2000 and
security
non-payment
of
the
contributions as
the
from 1995 until
suspension of payments procedure in 2000 constitute
aid within the meaning of Article 87(1) of the Treaty.
Since the debts to social security and the Tax Agency
to the suspension of
already constituted aid prior
the
is no need for
payments procedure,
agreements
the
Commission
concluded in 2002 involve additional aid.

there
assess whether

the start of

social

to

5. The 2000 loan provided by the ICF

(126) The ICF charged the same interest rate as that applied to
healthy companies for
loans secured with sufficient
collateral. The loan was granted after the start of the
suspension of payments procedure and therefore takes
priority over previous debt. However, this priority does
not affect the order in which mortgages and distraints
protect claims in the event of bankruptcy. Since at that
time the company was already in difficulty, such a
scenario was not at all unrealistic. Consequently, only if
the
sufficiently secured would it not
loan were
constitute State aid.

of

the

payments

procedure,

suspension

(123) As regards the further debts accumulated with the social
security authorities and the Tax Agency up to the start
the
of
Commission concludes that these too constitute aid, in
so far as the normal procedures would have enabled the
authorities to enforce collection by the date of the start
of the procedure. Up to November 2000 the company's
deteriorate
financial
(significantly), the debts had increased further and the
securities became further overburdened following the
1999
Spanish
authorities did not use all the legal means available for
recovering their claims. Therefore,
these subsequently
accumulated debts constitute further aid.

agreements. Again,

continued

payment

situation

the

to

(127) However,

the

sufficient. The
securities were not
mortgage consisted largely of the same collateral that
secured all previously described transactions and the ICF
would have been the last creditor in chronological order
and therefore the last to claim its share of the assets. At
the time the loan was granted all Puigneró's assets were
to an
burdened by earlier mortgages and distraints,
extent exceeding what a private investor would have
been prepared to accept. At this point the total unsettled
payments owed to the ICF and the social security and
tax authorities amounted to ESP 15 605 million (EUR
held
93,8 million). Other
mortgages for an amount of ESP 1 267 million. This
means that the loan would increase the total burden still
further beyond the value that could be expected in the
event of an enforced public auction.

preferential

creditors

(124) Under Spanish law new debts that arise in the course of
a suspension of payments procedure have priority over

(128) 9 620 of the shares had already been given as security
for the guarantee in 1996, and only 4 380 shares had

L 337/32

EN

Official Journal of the European Union

23.12.2003

not previously been given as security. In any case, as
explained in points 91 to 108, since Puigneró was in
financial difficulties, the shares did not represent any
substantial value as a security. As regards the personal
guarantee provided by the main shareholder,
the
Commission points out that any private lender would
prefer a quantified and concrete security to a general,
unspecified commitment. The Commission notes that
Spain has not provided any evidence for the value of
this
the main
shareholder is likely to be personally liable for the tax
debt of ESP 2 282 million, accumulated by the company
before the change in its legal form in 1982, which was
included in the total tax debt in 2000.

guarantee.

contrast,

personal

In

6. Compatibility of the aid

(133) Having established that State aid is involved in the 1993
loan and the 1996 and 1998 guarantees provided by the
ICF, in the non-payment of social security contributions
and taxes, and in the loan provided by the ICF in 2000,
the Commission must assess whether or not such aid is
compatible with the common market.

(134) The Commission notes that Spain has not relied on any
in the Treaty,
the measures do not

the derogations provided for

of
maintaining its position that
constitute State aid.

(129) Finally,

a

execution

them, with

shareholders
the properties owned by the
provide insufficient value in themselves,
in the first
place because their total execution value mentioned in
the loan contract amounts to only ESP 722 600 000
(EUR 4 342 914). Spain has not provided any estimate
of their actual value. The Commission notes that eight
of
of
total
ESP 396 100 000 (EUR 2 380 609), had only been
mortgaged for the purposes of the 1998 guarantee, also
in favour of the ICF (23), and served as collateral only
for the very small amount of EUR 41 752, which is
much lower than the total value of the loan. The two
other mortgages on two of these properties in favour of
the Tax Agency, ESP 16 000 000 (EUR 96 162), may
also still have been valid. Therefore, the Commission
concludes that the properties owned by the shareholders
could guarantee
a maximum of EUR 4 342 914,
although even this figure is not certain.

value

(130) The

loan was

rate
granted with
corresponding to Euribor 3 months + 1 %. Thus, the
interest rate, and notably the premium, corresponds to
that applied to healthy companies.

interest

an

(131) Given that

the loan was granted to an insolvent
company against insufficient securities and without a
corresponding risk premium, the Commission concludes
that the entire amount of the loan constitutes aid.

(132) For the same reasons as set out

argument
outstanding loans and guarantees cannot be accepted.

the loan may prevent

that

in point 102,

the
losses on the

(23) The property at Sant Feliu de Guíxols may actually have been
added as security to the 1996 agreement, rather than the 1998
agreement.

(135) The Commission has assessed whether the exemptions
set out in Article 87(2) and (3) of the Treaty apply. The
exemptions in Article 87(2) of the Treaty can serve as a
basis for considering aid to be compatible with the
common market. However, in this case the aid (a) does
not have a social character and is not granted to
individual consumers, (b) is not intended to make good
the damage caused by natural disasters or exceptional
occurrences
to
is not
compensate for the economic disadvantages caused by
the division of Germany. Neither does the aid qualify for
(b) and (d) of the
the exemptions in Article 87(3)(a),
economic
Treaty that
living is
development of areas where the standard of
abnormally
serious
is
low or where
there
underemployment,
to projects of common European
interest and to the promotion of culture and heritage
conservation.

required in order

to promotion of

and (c)

refer

the

(136) As far as the first part of

such as R&D,

the exemption in Article
87(3)(c) of the Treaty is concerned, for aid to facilitate
the development of certain economic activities,
the
Commission notes that the aid was not intended for
purposes
investment by SMEs or
protection of the environment. Article 87(3)(c) of the
Treaty also provides for the authorisation of State aid to
promote the development of certain economic activities
or areas, where such aid does not adversely affect
trading conditions to an extent contrary to the common
interest. The company is located in three areas in
Catalonia,
under
Article 87(3)(c). However, the aid does not comply with
the rules for regional investment: e.g., it is not linked to
initial investment.

of which

qualify

aid

for

all

(137) As indicated in points 79 to 86, at the time the various
aid measures were granted Puigneró was a company in
difficulty. As the primary objective of the aid would
have to be to restore the long-term viability of an
undertaking in difficulty, the Commission will assess its

23.12.2003

EN

Official Journal of the European Union

L 337/33

compatibility in the light of the Community guidelines
on State aid for rescuing and restructuring firms in
difficulty adopted in 1994 and 1999 (hereinafter the
‘1994 guidelines' and ‘1999 guidelines' respectively (24)).

R e s t o r a t i o n o f v i a b i l i t y

Rescue aid

a

(138) For the following reasons, the 1993 loan, the 1996 and
1998 guarantees and the aid involved in the deferral of
tax and social security obligations cannot be found
compatible as rescue aid.
In the first place, none of
these measures were restricted to a 12 month period, as
required by point 23(b) of the 1999 guidelines or, more
generally, to the time needed to devise the necessary
recovery plan, as required by section 3.1 of the 1994
guidelines. The loan and the guarantees were first
three-year period and subsequently
granted for
extended. The preparation of a recovery or restructuring
plan was not set as a condition. The 2000 loan was
initially granted for one year, but was subsequently
extended twice for another year. This
loan cannot
therefore be found compatible as rescue aid either in the
light of
the
measures do not constitute a one-off operation, but
must be regarded as various separate measures taken
over a longer period. Thirdly, Spain has not provided
any evidence that the other criteria were respected. The
Commission therefore does not have the necessary
information for concluding that the amount of the aid
was restricted to the amount needed to keep the firm in
business and that the aid was warranted on the grounds
of
social difficulties, without having undue
adverse spillover effects on the situation of the sector in
other Member States.

In the second place,

this requirement.

serious

Restructuring aid

(139) The guidelines establish the following conditions on
for

Commission

approve

can

aid

which
the
restructuring:

(140) The

the

grant of

aid must be

conditional on
implementation of a restructuring plan which must be
case of all
endorsed by the Commission in the
individual measures. The plan must
the
restore
reasonable
long-term viability within a
company's
timescale and on the basis of realistic assumptions as to
future operating conditions. With respect
to the
measures taken after the entry into force of the 1999
guidelines, the plan must include all relevant details, in
particular a market survey to allow consideration to be
given to the effects that public support has on keeping
an unhealthy company artificially alive, as this can force
healthy companies into difficulties.

(141) The Commission notes

that

there was no such
restructuring plan in place until November 2000. The
1993 loan, the 1996 and 1998 guarantees and the aid
tax and social security
involved in the deferral of
such
obligations were
all
reassurance of
return to viability as normally
a
contained in a viability plan. The Commission therefore
cannot
compatible with the
common market.

find these measures

granted without

any

(142) The 2000 loan,

in contrast, was granted following
presentation of a viability plan and conditional on its
implementation. However, the plan does not include a
market analysis taking into account the present state
and future prospects for supply and demand on the
relevant product market, with scenarios
reflecting
best-case, worst-case and intermediate assumptions and
the firm's position within it. Nor does the plan provide
information on market shares or a Community-wide
forecast for trends in demand, aggregate capacity and
serious
years
prices over
shortcomings
that
reflected
subsequently had to be made to the plan, notably the
closure of the production site at Roda de Ter. Another
the
shortcoming is that
company short of capital, not creating a definitive
solution to its financial difficulties but rather keeping it
afloat in the short run.

ahead. These
in the

it appears that

the aid left

the
are

changes

five

(24) OJ C 368, 23.12.1994, p. 12 and OJ C 288, 9.10.1999, p. 2. Point
101 of
the 1999 guidelines explain which guidelines apply in
principle to which measures. However, as the differences between
the two sets of guidelines have hardly any impact on the
in the
assessment of
following assessment only to the 1999 guidelines. Where the
distinction is significant, the applicable guidelines are indicated.
The 1994 guidelines (OJ C 368, 23.12.1994, p. 12) codified the
approach that the Commission had been taking for a long time.
The 1993 loan can therefore also be assessed under the same
rules.

the Commission refers

the measures,

(143) Consequently, the documents and information submitted
by the Spanish authorities do not allow the Commission
to conclude that the measures offered sufficiently firm
prospects
long-term
viability within a reasonable timescale. On this ground
alone, the Commission can find that the 2000 loan does

restoration of

Puigneró's

for

L 337/34

EN

Official Journal of the European Union

23.12.2003

not comply with the conditions of the 1994 and 1999
guidelines and hence is incompatible with the common
market.

again anticipated. It is therefore not possible to conclude
with certainty that a definitive reduction in capacity will
take place.

A v o i d a n c e o f u n d u e d i s t o r t i o n s o f
c o m p e t i t i o n

(148) Consequently,

this condition in the 1994 and 1999

guidelines is not respected.

(144) According to section 3.2.2(ii) of the 1994 guidelines,
measures must be taken to offset, as far as possible,
adverse effects on competitors. According to point 35 of
the 1999 guidelines, compensatory measures, such as an
irreversible reduction in capacity, must be taken to
mitigate as far as possible any adverse effects of the aid
on competitors.

be

likely

therefore

(145) The textile market is a highly sensitive market which
was characterised by overcapacity and declining output
throughout the period during which the aid to Puigneró
was granted. Any aid granted to a company operating in
this market will
to distort
competition. There is no evidence of any measures
having been taken to offset or mitigate the adverse
effects on competitors. On the contrary, it appears that
the aid enabled the firm to follow a low-price strategy,
thereby ensuring an outlet
its production, but
harming the interests of its competitors, as alleged by
them. The Commission recalls the comment by a third
party that Puigneró distorted competition on the market
by applying abnormally low sales prices. Puigneró
confirms in its new viability plan that its pricing policy
had a negative effect on the overall
level of market
prices.

for

(146)

In terms of turnover, the initial plan did not envisage
rather an increase.
any reduction in capacity, but
Among the measures to be taken the company was
planning to reduce prices in order to increase volume.
However, the new viability plan provides for a reduction
in capacity in that
to reduce its
loss-making activities, mainly in the spinning sector, and
refocus on products with higher added value.

the company is

(147) Moreover, Puigneró plans to close its entire plant at
Roda de Ter. However, the company has three years in
which to sell the plant and pay off part of the public
debt with the proceeds. In the event that the sale does
not materialise, there does not appear to be any clause
ensuring definitive closure of the plant and hence an
irreversible reduction in capacity. Moreover, despite the
closure of one entire plant and a substantial reduction
in the workforce, turnover is expected to remain at the
same level as before. A steady increase in turnover is

A i d l i m i t e d t o t h e m i n i m u m

(149) According to section 3.2.3(iii) of the 1994 guidelines
and point 40 of the 1999 guidelines, the amount and
the aid must be limited to the strict
intensity of
minimum needed to enable
to be
undertaken. Aid beneficiaries will also be expected to
make a significant contribution to the restructuring plan
from their own resources.

restructuring

(150) Spain has not provided a clear overview of the costs of
the restructuring. The main elements seem to be the
cost of closing down the Roda de Ter site and the
financing
financial restructuring. The main source of
will be the proceeds of the sale of the Roda de Ter site.
However, the sale is expected to take place within three
years, and the price that could be achieved is not
known for certain. Moreover, as was the case with the
the agreements with the public
previous agreements,
authorities make no provision for the eventuality of the
the plant within the
company not managing to sell
established time period.
event, no other
measures seem to have been taken to ensure the closure
of the plant. In view of these uncertainties regarding the
sale of the plant, it is not possible to conclude that this
measure satisfies the investor contribution criterion.

In that

(151) A second major source of finance for the restructuring
is, of course, the debt reductions as agreed by all the
creditors. These concern, however, mainly the public
creditors. Since the accumulation of the original debts
throughout the years in itself constitutes State aid, the
subsequent agreements on debt reductions cannot be
seen as a contribution from the beneficiary or from
external commercial financing. Thirdly, the plan counts
on continued financing by private banks as covered by
guarantees from the ICF. Fourthly, according to the plan
further assets will be hived off. However, the plan does
not specify which assets are to be sold, when or what
the proceeds are expected to be. Fifthly, the shareholders
have put up their assets, both property and shares in
the company, as securities for guarantees and loans.
However, as stated above, these (new) securities were
relatively small and insufficient to cover the guarantees
and loans. Finally, a partner is being sought who will

23.12.2003

EN

Official Journal of the European Union

L 337/35

bring capital to the company once the suspension of
payments proceedings have been settled. Given the
many uncertainties, it remains unclear whether the aid
is limited to the minimum and whether there is a
sufficient
from private
resources.

contribution to the

cost

(152)

In view of the considerations above, and especially the
lack of any market survey and the lack of guarantees
concerning the avoidance of undue distortions of
competition, the Commission concludes that the 1993
loan does not comply with the requirements of
the
guidelines.
the measures that have
been classed as aid must be deemed incompatible with
the common market.

In conclusion, all

VIII. CONCLUSIONS

(153) The Commission finds that the 1993 loan, the 1996 and
1998 guarantees and the 2000 loan provided by the ICF
constitute aid to Puigneró within the meaning of
Article 87(1) of the Treaty. The persistent non-payment
of social security contributions and tax obligations as
from 1995 and early 1993 respectively also constitutes
State aid to Puigneró. Spain has unlawfully implemented
the aid in question in breach of Article 88(3) of the
Treaty. The aid is, furthermore,
incompatible with the
common market.

(154) According to Article 14 of Council Regulation No
659/1999 (25) all aid that
is incompatible with the
common market is to be recovered from the beneficiary.
In doing so, Spain can deduct any repayment of the
loans or debts
respective
already made
authorities,

to the

HAS ADOPTED THIS DECISION:

Article 1

(c) a guarantee granted by the Catalan Institute of Finance in

1998 and its extension in 2001;

(d) the persistent non-payment of social security contributions
from 1995 until the start of the suspension of payments
the latter date the social
procedure,
security authorities could have enforced their collection in
accordance with normal procedures;

in so far as until

(e)

the start of

the persistent non-payment of tax obligations from early
1993 until
the suspension of payments
procedure, in so far as until the latter date the Tax Agency
could have enforced their collection in accordance with
normal procedures; and

(f) a loan granted by the Catalan Institute of Finance in 2000

and its subsequent extensions.

Article 2

1.
Spain shall take all necessary measures to recover from
the beneficiary the aid referred to in Article 1 and unlawfully
made available to the beneficiary, deducting any repayment
already made to the respective authorities.

shall be

Recovery

effected without delay

2.
and in
accordance with the procedures of national law provided that
the
they allow the immediate and effective execution of
decision. The aid to be recovered shall include interest from
the date on which it was at the disposal of the beneficiary
until the date of its recovery. Interest shall be calculated on the
the reference rate used for calculating the grant
basis of
equivalent of regional aid and shall be net of interest that has
already been charged by the respective authorities.

Article 3

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

The State aid which Spain has implemented for Hilados y
Tejidos Puigneró SA is incompatible with the common market.

Article 4

This Decision is addressed to the Kingdom of Spain.

The incompatible aid involves the following measures in favour
of Puigneró:

(a) a loan granted by the Catalan Institute of Finance in 1993

and its extension in 1996;

(b) a guarantee granted by the Catalan Institute of Finance in

1996 and its extensions in 1999 and 2001;

Done at Brussels, 19 February 2003.

For the Commission

Mario MONTI

Member of the Commission

(25) OJ L 83, 27.3.1999, p. 1.

L 337/36

EN

Official Journal of the European Union

23.12.2003

,

n
a
o

l

:
r
e
b
m
e
c
e
D

l
l
a

n
o

e
g
a
g
t
r
o
m

n
o

d
n
a

s
e
i
t
r
e
p
o
r
p

d
e
n
w
o

s
e
i
t
r
e
p
o
r
p

l

:
r
e
d
o
h
e
r
a
h
s

y
b

0
7
5
3
/
0
0
0
2

-
e
e
r
g
a

t
n
e
m
y
a
P

n
o

t
n
i
a
r
t
s
i
d

:

h
c
r
a
M

s
t
n
e
m

r
o
f

+
P

d
n
a

+
R

,

+
S

f
o

t
n
u
o
m
a

l
a
t
o
t

,

4
0
5
0
2

+
S

n
o

s
t
n
i
a
r
t
s
i
D

l
a
t
o
t

r
o
f

+
R

d
n
a

,

7
9
4
8

f
o

t
n
i
a
r
t
s
i
d

:
r
e
b
o
t
c
O

r
o
f

+
R

d
n
a

+
S

n
o

f
o

t
n
u
o
m
a

l
a
t
o
t

,

3
4
8
9

-
y
a
P

:
r
e
b
m
e
v
o
N

t
n
e
m
e
e
r
g
a

t
n
e
m

6
9
9
1

f
o

n
o
i
s
n
e
t
x
E

e
e
t
n
a
r
a
u
g

,
e
e
t
n
a
r
a
u
g

:
e
n
u
J

:

+
S

n
o

e
g
a
g
t
r
o
m

,

0
5
7
0
1
/
0
0
5

f
o

t
n
u
o
m
a

,

3
4
1
8
5

+
S

n
o

t
n
i
a
r
t
s
i
D

l
a
t
o
t

r
o
f

+
R

d
n
a

-
e
e
r
g
a

t
n
e
m
y
a
P

t
n
e
m

s
g
n

i
l
l
e
w
d

e
m
o
s
(

P

n
o

t
n
i
a
r
t
s
i
D

,

8
8
7
4
/
?

:
)
y
l
n
o

n
o
i
s
n
e
t
x
E

:

y
a
M

n
a
o

l

3
9
9
1

f
o

:

+
P

n
o

e
g
a
g
t
r
o
m

,
e
e
t
n
a
r
a
u
g

:

y
l
u
J

5
3
1
1
/
0
0
6

)
n
o
i
l
l
i

m
P
S
E
(

0
0
0
2

9
9
9
1

8
9
9
1

7
9
9
1

6
9
9
1

5
9
9
1

4
9
9
1

3
9
9
1

2
9
9
1

2
9
9
1

o
t

r
o

i
r
P

I

X
E
N
N
A

s
e
i
t
i
r
o
h
t
u
a

h
s
i
n
a
p
S

e
h
t

y
b

s
e
r
u
s
a
e
m

f
o
w
e
i
v
r
e
v
O

)
1
(

R

n
o

e
g
a
g
t
r
o
M

f
o

t
b
e
d

a

r
o
f

,

7
2
0
7
6
/
6
6
1
5
3

,

-
e
e
r
g
a

t
n
e
m
y
a
P

t
n
i
a
r
t
s
i
d

)

1
9
9
1

(

s
t
n
e
m

:

+
S

d
n
a

+
R

n
o

.

3
7
0
8
/
1
6
5
6

.

,

1
2
1
6
4
/
?

:

R

n
o

e
g
a
g
t
r
o
M

y
t
i
r
u
c
e
s

l
a
i
c
o
S

/

l
a
p
i
c
n

i
r
P

e
g
a
r
e
v
o
c
m
u
m
i
x
a
m

y
c
n
e
g
A
x
a
T

n
o

e
g
a
g
t
r
o
m

,

n
a
o
L

6
7
9
/
0
0
5

:

2
P

)
2
(

e
g
a
g
t
r
o
m

6
8
8
/
0
5
6

:

P

)

1

(

n
o

n
o

e
g
a
g
t
r
o
m

)

2

(

5
2
2

:

2
P

n
o

e
g
a
g
t
r
o
m

)

3

(

5
7
2

:

2
P

7
6

:
s
g
n

i
l
l
e
w
d

o
w

t

n
o

e
g
a
g
t
r
o
m

)

4

(

S

n
o

e
g
a
g
t
r
o
m

0
0
2
1

:

P

d
n
a

)

5
8
9
1

(

)

1

(

F
C

I

s
r
e
h
t
O

e
d

s
t
a
r
P

t
a

e
t
i
s

l
a
i
r
t
s
u
d
n

i

e
h
t

f
o

t
r
a
p

r
e
l
l
a
m

s

=

2
P

;
s
è
n
a
ç
u
l
L

e
d

s
t
a
r
P

t
a

e
t
i
s

l
a
i
r
t
s
u
d
n

i

e
h
t

f
o

t
r
a
p

r
e
g
r
a
l

=

1
P

;
s
è
n
a
ç
u
l
L

e
d

s
t
a
r
P

t
a

s
e
i
t
r
e
p
o
r
p

r
e
h
t
o

e
h
t

f
o

l
l
a

r
o

e
m
o
s

d
n
a

e
t
i
s

l
a
i
r
t
s
u
d
n

i

=

+
P

;
s
è
n
a
ç
u
l
L

e
d

s
t
a
r
P

t
a

e
t
i
s

l
a
i
r
t
s
u
d
n

i

.

u
a
r
G

l
e
d

u
e
m
o
t
r
a
B

t
n
a
S

t
a

s
e
i
t
r
e
p
o
r
p

r
e
h
t
o

e
h
t

f
o

l
l
a

r
o

e
m
o
s

d
n
a

e
t
i
s

l
a
i
r
t
s
u
d
n

i

=

+
S

;

u
a
r
G

l
e
d

u
e
m
o
t
r
a
B

t
n
a
S

.
r
e
T

e
d

a
d
o
R

t
a

s
e
i
t
r
e
p
o
r
p

r
e
h
t
o

e
h
t

f
o

l
l
a

r
o

e
m
o
s

d
n
a

e
t
i
s

l
a
i
r
t
s
u
d
n

i

=

+
R

;
r
e
T

e
d

a
d
o
R

t
a

t
a

e
t
i
s

e
t
i
s

l
a
i
r
t
s
u
d
n

i

l
a
i
r
t
s
u
d
n

i

=

=

=

r
e
t
s
i
g
e
r

y
t
r
e
p
o
r
p

e
h
t

t
u
b

,

u
a
r
G

l
e
d

u
e
m
o
t
r
a
B

n
a
S

d
n
a

s
è
n
a
ç
u
l
L

e
d

s
t
a
r
P

t
a

s
e
t
i
s

l
a
i
r
t
s
u
d
n

i

e
h
t

n
o

s
e
g
a
g
t
r
o
m
h
s
i
l

b
a
t
s
e

o
t

o
s
l
a

s
a
w

ó
r
e
n
g
i
u
P

s
t
n
e
m
e
e
r
g
a

e
s
e
h
t

o
t

i

g
n
d
r
o
c
c
A

.
s
t
n
e
m
e
e
r
g
a

t
n
e
m
y
a
p

2
9
9
1

e
h
t

m
o
r
f

s
t
l
u
s
e
r

e
g
a
g
t
r
o
m

s
i
h
T

.
e
t
a
d

e
m
a
s

e
h
t

s
e
i
r
r
a
c

2
P

n
o

e
g
a
g
t
r
o
m

r
e
h
t
o

e
h
t

h
g
u
o
h
t
l
a

,

2
P

r
o
f

t
o
n

t
u
b

,

1
P

r
o
f

r
e
t
s
i
g
e
r

y
t
r
e
p
o
r
p

e
h
t

n

i

d
e
n
o
i
t
n
e
m

s
i

t
I

.
s
t
n
u
o
c
c
a

l
a
u
n
n
a

e
h
t

n

i

d
e
n
o
i
t
n
e
m

t
o
n

s
i

e
g
a
g
t
r
o
m

s
i
h
T

.
s
e
g
a
g
t
r
o
m
h
c
u
s

y
n
a

n
o
i
t
n
e
m

t
o
n

s
e
o
d

.
s
è
n
a
ç
u
l
L

S

R

P

)
1
(

)
2
(

23.12.2003

EN

Official Journal of the European Union

L 337/37

ANNEX II

Overview of estimated value of properties

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

(ESP million)

Value of Roda de Ter industrial
site, machinery and
dwellings (1)

Value of S.B. del Grau
industrial site, machinery and
dwellings

Value of Prats de Lluçanès
industrial site, machinery and
dwellings

3 758,5

4 173,6

4 634,6 5 146,5

5 714,9

6 346,1

7 047,1

7 825,4

8 689,7

9 649,8 10 715,3

4 181,4

4 643,2

5 156,1 5 725,6

6 358,0

7 060,2

7 840,0

8 705,9

9 667,5 10 735,8 11 921,0

1 054,2

1 208,9

1 386,2 1 589,6

1 822,8

2 090,2

2 396,9

2 748,5

3 151,8

3 614,2

4 144,4

Total value industrial sites

8 994,1 10 025,8 11 176,9 12 461,7

13 895,7 15 496,4 17 284,0 18 279,8 21 509,0 23 999,9 26 780,7

Tax debt

3 516,6

2 426,2 2 805,3

2 791,7

2 023,0

3 073,3

3 738,0

7 364,0

Social security debt

4 727,3 5 259,8

5 996,3

6 190,2

7 288,7

8 815,7

9 963,1

Tax and social security debt

7 153,5 8 065,1

8 788,0

8 213,2 10 362,0 12 553,7 17 327,1

Burden of mortgages for other
debts

2 267,0 (2)

2 267,0

2 267,0

1 992,0

1 992,0

3 992,0

(1) The 1992 payment agreements between Puigneró and the tax authorities contain estimates of the value of the properties in 1992. The 2001 values are based on the
valuation carried out by an independent expert with a view to drawing up the statement of affairs for the suspension of payments procedure. The 1992 value of the
properties at Roda de Ter and San Bartomeu del Grau and all the values between 1992 and 2001 are based on the assumption of equal annual increments in value for
these properties (11,0 % for Roda de Ter and San Bartomeu del Grau and 14,7 % for Prats de Lluçanès; these increments include inflation). The figures do not include
the value of ‘other installations, tools, transport equipment, furniture, IT equipment and stocks', which altogether were valued in 2001 at ESP 5 443,8 million.

(2) The actual debt covered by these mortgages amounts to only ESP 761,2 million.