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EU to Loosen Rules to Enable State Stakes in Virus-Hit Firms

EU to Loosen Rules to Enable State Stakes in Virus-Hit Firms

(Bloomberg) --

The European Commission is planning to make it easier for governments to take equity stakes in companies hit hardest by the coronavirus pandemic.

The EU’s antitrust arm said on Thursday it’s sent governments a draft proposal to further relax rules governing state spending during the Covid-19 outbreak.

The regulator plans to put the new rules into effect next week to enable recapitalizations to companies in need, which “should remain measures of last-resort” since they can have a significant impact on competition.

Any stakes will have “clear conditions as regards the state’s entry, remuneration and exit from the companies concerned, strict governance provisions and appropriate measures to limit potential distortions of competition,” the commission said. It is asking governments for feedback on public support in the form of equity or hybrid capital instruments.

France is planning massive support for its flagship carrier Air France-KLM, which is already negotiating about 6 billion euros ($6.6 billion) in loan guarantees. France and the Netherlands are already the airline’s biggest shareholders. Deutsche Lufthansa AG is also under mounting pressure to hand over an equity stake to the German government, according to people familiar with the matter.

©2020 Bloomberg L.P.