Financing in the public sector

The reasons for this are as varied and diverse as the government's tasks: New public transport vehicles, the remunicipalisation of the electricity and gas supply, the conversion/new construction of hospitals and care facilities due to new legal requirements as well as general debt rescheduling and restructuring of public companies.

At the same time, debt financing has become more difficult. The financial crisis, Basel II and III, weak margins in the municipal business and stricter EU state aid requirements have led to restraint and higher lending requirements on the part of banks. Loan volumes of EUR 50 million or more are now regularly only granted jointly by several banks by way of so-called club deals or as syndicated loans.

The increase in syndicated financing and syndication of loan receivables in turn entails more complex contracts (LMA standard) and negotiation situations with several syndicate partners as well as greater risk assessment on the part of the banks. In addition, new financing must be harmonised with existing financing in terms of maturity, structure and debt service, among other things.

Public companies are often only prepared to a limited extent in terms of personnel and expertise for new requirements from banks, such as detailed profit and investment planning, the review of debt servicing capacity, reporting obligations, compliance with covenants and waiver procedures. In addition, they often underestimate the time it takes to finalise and disburse financing. Conversely, banks are not yet fully familiar with the specific problems and solutions involved in financing public companies. This applies, for example, to the assessment of whether guarantees and entrustment acts of the shareholder (state/municipality) and profit and loss transfer agreements can be used as the basis for financing, as well as to requirements under municipal supervisory and regulatory law.